In a posting on ZeroHedge there is mention of Swiss National Bank (SNBN) and the “bubble” that seems to be percolating in the stock. We don’t know whether or not the price of the stock is in a bubble. However, what does resonate with us is any sign of a parabolic rise in price. In the case of SNBN, we believe that we can attribute Speed Resistance Lines (SRL) that are consistent with viable downside targets.
First, whenever applying SRLs, we like to find out if there has been any precedence on the matter. In the case of SNBN, we have obtained data from Yahoo!Quotes (ChartIQ), which goes back to 1995. It is just our luck that there is a prior period when SNBN has a similar rise and subsequent decline.
Considering that there is a reasonable amount of precedent in the stock price movement of SNBN in the period from 1995 to 1997, we have taken the liberty in projecting what the current level of price increase could result in, if history is any guide.
The history that we’re referring to is our extensive work on applying Speed Resistance Lines (SRL) to previous parabolic price increases. In more than 80% of the models that we’ve run (in real time) using SRLs, the decline to the conservative downside targets have come to fruition. However, we can’t claim anything unique other than having a specific target price as a “reasonable” expectation.
In reviewing the period from 1995 to 2003, we see how the price of SNBN increased nearly +297%. However, the subsequent decline was slightly more than -70% at the 2000 low of 655.
The decline from 2,340 smashed through the following SRL downside targets:
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1,370 (conservative target)
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1,075 (mid range target)
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780 (extreme target)
Worth noting is the fact that SNBN should be considered the paragon of dullness and stability. Therefore, any price action that achieves similar extremes should be a huge warning sign. What any speculator, spectator or investor should be looking for as the norm, in the case of SNBN, is the period from 2000 to 2016. Which makes the period from 2016 to 2017 alarming to say the least, as indicated in the SRL below.
The SRL downside targets are indicated in the chart as follows:
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2,680 (conservative target)
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1,923.33 (mid range target)
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1,166.33 (extreme target)
Again, this “real-time” assessment of SNBN requires that the reader understand two very important things. Swiss National Bank is supposed to be a central bank and is historically thought to be conservative in investment policy. Therefore, there is little rational explanation for any kind of parabolic rise in excess of alternative high risk speculations available.
Finally, as with all downside targets that we generate using Speed Resistance Lines there are also upside targets. In the period from 1995 to 2000, the upside targets were:
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2,055 (conservative target)
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3,082 (mid range target)
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4,110 (extreme target)
The upside targets are based on any available preceding period for subsequent rebound after established downside targets are achieved. We will ride on the idea that although SNBN is “high” there remains the chance that 4,110 can be achieved before the conservative downside target of 2,680 is accomplished.