Looked at through a 20 year lens, shares of Credit Suisse look like something out of a horror movie. While the longer-term view on the stock is still very much in jeopardy from where I sit, in the near to intermediate term the stock is starting to signal more constructive patterns that could lead to a squeeze higher.
In early July CSGN stock plummeted to fresh lows, breaking below the early 1991 lows. While the stock has rebounded since, thus far it has simply worked its way back to the horizontal line in the low teens, i.e. what used to be support... and this indeed could end up becoming resistance.
As such, from this long-term perspective the stock is far from out of the woods and is keeping most institutional investors that I speak with far away. But therein may lie some opportunity...
On the closer-up time frames of the daily chart we see that shares of Credit Suisse off the July lows have rallied more than 30% and while this was one heck of a trade already, the stock is in my eyes just now showing tighter technical patterns worth considering.
Note that the stock recently pushed back above its blue 100-day moving average (a line it has not traded above since the third quarter of 2015). At the same time the stock is trading right below diagonal resistance and over the past few days has been consolidating in a tighter range.
From here the stock stands a decent chance of breaking out of consolidation and past resistance to the upside.
Source: Saxo Bank
Management and risk description
From a risk management perspective traders will want to respect the possibility of some September/October volatility in markets, which if and when could also weigh on a stock like that of Credit Suisse. As such, any position size in this breakout trade should be reduced, i.e. less than a full position size.
Entry: buy the stock or CFD at CHF 13.20 or higher.
Stop: CHF 12.60.
Target: CHF14 - CHF 14.50.
Time horizon: two to four weeks.
— Edited by Michael McKenna
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Non-independent investment research disclaimer applies. Read more