News flash: As of close of trading on Friday 17 March, the Financial Times is reporting that the boards of UBS and Credit Suisse are to meet to discuss UBS’s potential takeover of all or part of Credit Suisse. The situation remains fluid and we could have very volatile market conditions next week. But read on to find out how this iconic Swiss banking institution got to where it is today.
Intro: what’s happening to the Credit Suisse stock price?
Shares of Swiss banking giant Credit Suisse have suffered a monumental collapse, dipping to new all-time lows just days after Silicon Valley Bank and Signature Bank went under.
The contagion from the bank’s troubles is dragging down European markets, with the FTSE 100 losing 3.2% on 15 March in its biggest daily loss since the pandemic broke out three years ago. Credit Suisse’s stock lost 24% on the day it hit record lows after its largest shareholder said it would no longer provide financial assistance to the troubled bank.
The latest plunge was triggered by a report from Credit Suisse that its auditors had identified material weaknesses in its reporting controls. The Swiss financial institution now seeks close to 50 billion Swiss Francs ($54 billion) from the Swiss National Bank’s (SNB) liquidity facility.
As expected, the Credit Suisse stock price fell to a new record low of 1.75 Swiss Francs on 14 March 2023, capping a downbeat performance two years in the making. The stock pared some of these losses after the bank said its international branch sought to buy back some OpCo debt securities worth 3 billion francs. The bounce on this news sent the stock to 2.16 CHF the next day. This price represents a fifth of the Credit Suisse stock value at the start of 2022.
The question is: how did one of the world’s largest financial institutions and major liquidity providers for the global interbank forex markets get to this point? What created the recent Credit Suisse stock volatility?
So what happened to the Credit Suisse stock price this week? Credit Suisse has had issues in the past two years, stemming from the spy gate scandal that led to the exit of the former CEO. However, the unfolding events in the US banking sector set the bank’s stock up for a monumental collapse. This expectation was met when the news of the reporting control deficiencies broke. The stock’s daily chart shows the rollercoaster ride of the stock this week.
First we had the plunge of 14 March, followed by the recovery on the 16th after the Swiss National Bank came out to show solidarity with the bank, saying it had no liquidity issues. The provision of the liquidity facility by the Swiss apex bank also allows the bank to draw on additional capital if needed.
Why is the Credit Suisse situation important?
The situation with Credit Suisse shows how vulnerable the global banking system has become in our globalised world. An event in one part of the globe can easily have a cascading effect on financial institutions in another part of the world. While the evidence does not point to a 2008-style financial crisis, the situation with Silicon Valley Bank indicates a new threat that could trigger bank runs: social media.
Recall what happened to the FTX crypto exchange. There were underlying issues, but things came to a head when the CEO of Binance, Changpeng Zhao, tweeted that his exchange was liquidating all their FTT token holdings. This led to a run on the exchange and its eventual collapse. A similar thing happened to Silicon Valley Bank, as a series of leaked conversations by startup industry and hedge fund leaders prompted a bank run on SVB, leading to $42 billion worth of withdrawals in a single day.
These two situations led to massive price upheavals in the crypto and stock markets, creating massive volatility that created many trading opportunities for discerning investors.
The opportunity: trading fluctuations in the Credit Suisse stock price
The Credit Suisse stock volatility witnessed in the week ended 17 March 2023 is the type that produces rare trading opportunities for those who know how to ride the rollercoaster movements in their trades. You must follow the news and know when to buy low and sell high, even within a prevailing trend. The increased volatility produces a high-risk, high-reward situation.
For instance, the defense of Credit Suisse by the Swiss National Bank produced a spike from all-time lows, resulting in a 32% upside movement on 16 March. Those who bought at the previous day’s low could have seen at least 30% gains on their portfolio. Those who preferred to trade the prevailing downtrend may also have seen this uptick as a retracement and a new opportunity to initiate new shorts. These Credit Suisse stock buy or sell opportunities are quick, short-term plays that can produce good returns if you know how to buy or sell at the right time. Using the stock trading suite on the TFF Funded Trader Program is a good way to trade the Credit Suisse situation as you get good capital that allows you to take reasonably healthy positions.
Your Credit Suisse stock price target when you trade should be a balance of taking on acceptable risk while using positions that can produce good profits if your entries and exits are spot on. A secret to benefiting from the Credit Suisse stock price volatility is that the stock is traded on the Swiss stock exchange and the New York Stock Exchange (as a depository receipt). The price action on the Swiss stock exchange precedes the New York Stock Exchange. If the stock is down on the Swiss exchange, you can expect the bearish expectations to be carried into the New York trading session.
A potential Credit Suisse stock buy or sell scenario
How would you have traded the recent Credit Suisse stock volatility? Remember that stock CFD trading is done bi-directionally, meaning you can go long or short depending on your expectations for the price direction.
Before you proceed, here are some things to consider.
- Stock exchanges are not 24/7 markets. They are only open for certain hours each day. So if you are to trade the Credit Suisse stock, you can only do this when the Swiss exchange or New York Stock Exchange is open for business.
- Price action is very volatile, and you will see price gapping a lot. Conventional technical analysis is complicated in these circumstances, and slippage will be common.
- You will need to trade off short-term charts. Long-term charts should only be used for trend detection.
- Consider the direction of the stock trade in the Swiss stock exchange. This will be the bias for New York trading. In this example, the stock closed lower in the Swiss exchange, setting a bearish bias for New York trading.
One way to trade the Credit Suisse stock price action is to look for emerging chart patterns. The snapshot is the 5-minute chart for the Credit Suisse stock listed on the New York Stock Exchange. The long-term chart (4-hour and daily charts) indicates that the trend remains bearish, and any upticks are to be viewed as upside retracements that present new selling opportunities.
The chart shows a rising wedge pattern. This bearish pattern is expected to conclude with a further dip in the Credit Suisse stock price. According to technical analysis, the extent of the breakdown move from the pattern should equate to the similar move that preceded the pattern. Given this scenario, do you just sell at the current levels?
Notice the price gapped down, and most gaps tend to be covered initially. It would be more prudent to wait for coverage of the gap to the upside, which also produces the required retracement to provide better pricing for any short entries.
No pattern is a given in trading. Buyers may also push the prices above the pattern, especially if there has already been a decisive selling move and more positive news is hitting the newswires. If the price is pushed above the pattern, this would negate any selling bias, and the trader would look for a new buying opportunity. You can expect more Credit Suisse stock buy or sell setups in the coming days.
Credit Suisse stock volatility vs other stocks
The situation with Credit Suisse is not going away soon. The current news of the day is that some of the biggest US banks have pulled money to save yet another bank that was going bankrupt. The rescue deal for First Republic Bank will continue to put the banking stocks on the front burner as the most volatile stocks of the moment. These will present trade opportunities for those who want to trade Credit Suisse and other banking stocks.
Your job as a trader is to recognize these opportunities and use the platform that has been provided by the TFF Funded Trader program to profit from such opportunities.
Has the Credit Suisse situation created other opportunities?
The market upheaval caused by the Credit Suisse situation has profoundly impacted other markets, given the correlated nature of many of these assets. For instance, stock indices are trading lower. The US Dollar has given up a lot of ground against risky assets, as the crisis has started to cause traders to scale back bets of any rate hikes by the US Federal Reserve when it meets on 22 March. Indeed, Goldman Sachs thinks the Fed will have to pause its rate hikes, a volte-face from a week before when the markets had priced in a 50 basis points rate hike. Gold is attracting heavy demand as a safe-haven asset, gaining to the $2,000 price mark.
The TFF evaluation programs allow you to trade all these assets. So even if you are not trading Credit Suisse or any banking stocks directly, there are opportunities to trade other correlated assets.
The situation remains very fluid. The main driver of the price movements on Credit Suisse will be the following:
- Will there be further reports that undermine the performance of the Credit Suisse stock price? If so, will the market respond by driving prices much lower, seeing that the stock has suffered a consistent fall in the last two years?
- Will UBS take over Credit Suisse?
- Will there be more positive news in the form of a rescue package, more support from the Swiss National Bank, or the completion of its OpCo debt security buyback?
- Will there be more news of bank collapses or rescues? These have a systemic effect on banking stocks as a whole.
- Will the Fed raise, hold or cut interest rates? This news event slated for 22 March will be a significant market-mover from 22 March to the end of the month.
If you have not registered for TFF’s evaluation programs, this is the time to do so as the market is laden with opportunities for discerning investors. There will be ups and downs in the days to come. Know when to buy or sell in the short term to profit from quick market moves.