• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Financial Services

Credit Suisse Has Made a Normal Correction

It's time to go long the shares.
By BRUCE KAMICH
Apr 19, 2017 | 10:17 AM EDT
Stocks quotes in this article: CS

Credit Suisse (CS) made a 60% rally from its early June low -- impressive. Over the past three months, CS has given back just $2 of its $6 mark-up. If you went long at $16 you may not be happy, but let's put some perspective on this.

Some 115 years ago, Charles Henry Dow wrote about markets correcting one third, one half or two thirds of the prior major move. CS has corrected one third of its prior advance.

Now that we know that the pullback in CS is normal, the next questions are: is the decline over and do we want to go long for hopefully the next leg to the upside?

In this daily bar chart of CS, above, we can see the seven-month rally phase from early July to January. Both the 50-day and 200-day moving averages responded to the advance, and the slope of the 50-day turned up in September and the 200-day in January. The 200-day average line is still rising, but the quicker-to-react 50-day average line turned down last month.

The On-Balance-Volume (OBV) made a strong advance from June to December, confirming the price gains. The OBV line has eased a little lower since December and suggests only minimal liquidation of the past four months.

There is a bullish divergence from the lower lows in price seen from February into April and the higher readings from the 12-day momentum study in the lower panel. This bullish divergence tells us that the pace of the price declines has slowed and this can sometimes foreshadow a turnaround on the charts.

In this weekly bar chart of CS, above, we can see the big decline that CS suffered from 2014 into 2016. Prices rallied back in the latter part of 2016 and closed above the flat 40-week moving average line. Prices have pulled back in recent weeks to retest the rising 40-week moving average line.

I don't anticipate that the 40-week moving average line will be broken on a closing basis. The weekly OBV line is interesting, or a problem. The OBV line on this timeframe has been in a decline since early 2016 and only made a modest recovery when prices rallied 60% from their lows.

For the past five months, prices have been steady but the OBV line has declined to a new low. How should we interpret this "odd" behavior? Is it bullish that prices are steady when selling pressure, seen through a weak OBV line, is increasing? Or should we expect that prices will eventually get the bearish message from the OBV line?

In the lower panel is the weekly Moving Average Convergence Divergence (MACD) oscillator, which has signaled a take profits sell signal last month, when the two moving averages crossed to the downside.

In this Point and Figure chart of CS, above, we focus just on the price action and ignore the volume and confusing indicators like the OBV line. We can see a bigger decline than seen on the one-year and three-year bar charts. Prices peaked in late 2010 around $41 and turned down to touch $10.50.

Most of the price action in 2016, on this chart, is a bottom formation that some books would call a fulcrum bottom. The rally to $15.50 was a breakout and yields a potential upside price objective of $20. Prices are currently in a down column (Os) with support at $14 and lower and a rally to $16.50 needed for a fresh breakout.

Bottom line: when I am confronted with a conflict or ambiguous technical indicator, I typically go with the price action. Volume is important, but price is more important. Keeping that in mind, with CS near support after a 1/3 retracement I would approach CS from the long side. Aggressive traders could go long here with a sell stop below $13 and they could add to longs on a close above $15.25.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are restricted from trading individual securities.

TAGS: Investing | U.S. Equity | Financial Services | Markets | How-to

More from Financial Services

Here's When to Move on Zillow

Bruce Kamich
Mar 3, 2021 2:18 PM EST

A correction in Zillow Group is unfolding, so let it play out first.

Get Some Dividend Insurance With This Stock

Bob Ciura
Mar 3, 2021 12:23 PM EST

Mercury General offers a 4.2% yield and growth promise, as it offers insurance in 11 states including California.

Time to Consider Making a Withdrawal From Webster Financial

Paul Price
Mar 3, 2021 7:00 AM EST

I typically tell you when I see opportunities to get into, not out of, stocks, but this one appears to be getting overvalued.

Square Still Looks Vulnerable Despite the Recent Bounce

Bruce Kamich
Mar 2, 2021 11:00 AM EST

SQ's overall chart picture suggests more weakness is possible.

Rocket Companies Is Not Ready to Blast Off

Bruce Kamich
Mar 1, 2021 10:36 AM EST

The company went public seven months ago.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 08:50 AM EST PAUL PRICE

    Michaels: Close to a Deal?

    It appears that a deal could be announced soon. ...
  • 08:34 AM EST GARY BERMAN

    Wednesday Morning Fibocall for 3/3/2021

    SPX (Long-Term View) The 20 DMA @ 3889 with the ...
  • 06:05 PM EST PAUL PRICE

    Michael's (MIK) Up on Takeover Rumors

    The NYT says talks are underway regarding a buyout...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login