Swiss Market Index deep dive
Updated: Nov 19, 2019
Earlier this year, the SMI was one of the first index around the world to make new all time highs.
An index is always the average of all its components. Therefore it is always interesting to take a so called deep dive into each and every single stock making up an index, focusing on those that are in an uptrend and putting aside those that are either in a downtrend or in a sideways range.
Let's start with checking where the index itself stands, before looking at its 20 components.
Here's the Swiss Market Index monthly chart.
As previously mentioned in the Charts Interpretation section, while the supply remained at a constant level (9600 area) the demand always came at an earlier stage (read as the buyers were eager to buy each price pull back at a higher level). Now that the price was able to breakout of that overhead supply, this level now turns into support and the next resistance/ target in sight lies around 10530. The RSI as well as the MACD are both in a bullish range while not overbought. In conclusion, the SMI is in an uptrend and still has room for some upside.
With that in mind, let's have a look at its components.
First, let's check those that are, like the index, in an uptrend...
Here's Geberit (GEBN) monthly chart
After a 5 years sideways trading range (2007-2012), the stock was able to breakout in February 2013. It went through its first Fibonacci extension level to come back down to test it/confirm it, as new support, in August to October 2015. The price then had some whipsaws around the second Fibonacci extension but since October 2019 has cleared the previous highs and looks to be on its way to its next Fibonacci level at CHF648.
On the shorter term, Geberit created a 2+ years basing pattern which it was able to break out of a month ago. This breakout area becomes support (~CHF486) with a target just under the CHF570 level.
Here's the weekly chart
Another stock in a clear uptrend is Givaudan (GIVN), here's the monthly chart
Geberit and Givaudan charts almost look alike, although if you look a bit closer, it took Givaudan 6 years (2007-2013) to breakout of its sideways range (compared to 5 for Geberit). Givaudan is on a clear uptrend with CHF3379 as its next long term Fibonacci level.
Here's Givaudan weekly chart
Interesting price action here, the stock used old resistance levels as new support areas. During uptrends, the price also used the 40-week moving average as dynamic support. The next resistance area is CHF3079.
Another similar monthly chart is Sika (SIKA)
Once again 6 years sideways range (2007-2013), until the stock was able to break out in October 2013. Current support lies around CHF151 whereas the next resistance level is just under CHF238.
Here's the weekly chart
SIKA offers a nice risk versus reward, as long as the price stays above its support around CHF165 the next level of interest can be found just over CHF200.
Next, Swiss Re (SREN). The monthly and the weekly charts are telling the exact same story so let's dive straight into the weekly chart
After a false breakout in April, the price broke out of its ascending triangle in September, had some consolidation in October to digest the prior move and now is now looking to resume its uptrend. As long as Swiss Re can stay above its breakout area (CHF99.75) the price should be on its way to CHF112.55.
Next, Zurich Insurance (ZURN) monthly chart
The price action since mid 2001 has formed an ascending triangle. As long as the stock trades under its overhead resistance (CHF396.50) there's not need to get involved as it remains within that said pattern. If/when the price is able to break above the aforementioned resistance level, then will Zurich Insurance be starting a next leg higher with a long term target just under CHF565.
Let's look at the weekly chart
On the shorter term, as long as the price can stay above its support area (CHF370-377) and is able to clear its monthly overhead supply (CHF396.50) it has the potential to reach its next Fibonacci level near CHF435.
Next the pharmaceuticals, first Novartis (NOVN) monthly chart
On the longer term, Novartis needs to clear its overhead supply around CHF92-95 to get going. Until the stock is able to brake out to new highs, staying on the sideline is best.
The weekly chart shows Novartis in an uptrend since August 2018 and hints that the aforementioned monthly breakout is a clear possibility
As you can see, the price just broke out of a falling wedge, using the 40-week moving average as a dynamic support for the 4th time since August 2018. Add in the RSI bouncing off the 48 level each time the stock price made a dip, and that is much evidence in favor of a continuation of the uptrend.
Next Roche (ROG). As always we start with the longer term (monthly) chart
Here, the price action is also using old resistance as new support, although not as perfectly as Givaudan (see above). This is most probably why the saying goes as "Technical Analysis is more art than science".
Here's the weekly chart
Roche is currently testing its highs and if able to work its way above it, should be on its way to its next Fibonacci extension level just above CHF320. Support lies around CHF280.
Here's Nestle (NESN) monthly chart
While in an uptrend, the stock currently looks a bit overextended. Such a steep price move can be "digested" either through price (pull back) or through time (price consolidation over an extended period). Nestle looks to be applying the former.
Let's look at the weekly chart for more granularity
Here are the various Fibonacci retracement levels from the December 2018 to September 2019 advance. Bearing in mind that some traders/investors are using 33% and 66% as retracement level (instead of the 38.2% and 61.8% Fibonacci levels), therefore a turn around in price could happen near those Fibonacci levels and do not need to happen at those exact levels to be a valid reversal. The RSI as well as the candlesticks combinations will help us determine as and when this will occur, which will provide a better risk/reward entry area.
Next Lonza (LONN)
While the monthly chart is in an uptrend, the bearish divergence (price making higher highs while the RSI is making lower highs) is raising some concerns. The MACD is converging and close to making a bearish cross. Let's check the weekly chart
In technical analysis, the benefit of the doubt is always given to the prevailing trend. Therefore Lonza is still in an uptrend until proven otherwise. Even though the bearish divergence is also clearly present on the weekly chart, it only serves as a warning sign, until the price action starts breaking down.
Next Swiss Life (SLHN)
On this monthly chart, Swiss Life is near its target (CHF517) derived from the February 2007 to February 2009 decline, some price consolidation around this area is to be expected.
Here's the weekly chart
Like Lonza, a bearish divergence is visible here on Swiss Life, but as long as the price can stay above CHF482, the uptrend prevails. If/when the price would break below its 40-week moving average, that said moving average would slope down instead of currently up, that would add some clear downtrend signals. Until this happens, the uptrend remains in place.
Now let's have a look at 2 components that are in a downtrend
First off UBS (UBSG)
This monthly chart shows how UBS, although in a downtrend since January 2018, is trying to breakout or at least start a basing pattern, especially with the MACD converging and close to making a bullish cross. It will be interesting to see if UBS can close the month outside its downtrend line.
On the weekly chart, UBS has already been able to not only close above its downtrend line in place since January 2018, but also its 40-week moving average.
It looks like the stock is in a bottoming process. The price needs now to hold above its 40-week moving average, and the RSI should break above the 65-70 level. Next resistance is around CHF12.77 (gap area) followed by CHF13.55 area.
Next is Credit Suisse monthly chart
Here, eventhough the MACD bullish cross has already happened, the price needs to break above a confluence of resistance around the CHF14.50 area.
On the weekly chart, Credit Suisse is not only putting higher lows, but also trading above its 40-week moving average which is sloping slightly upwards.
The issue remains that big overhead supply in the CHF14.50 area. Until the price can break above it, the stock remains in a downtrend, sideways range at best.
The other 8 SMI components are all in sideways range, with no clear direction. Therefore they do not require too much attention until a breakout or breakdown occurs, to dictate the next trend.
Here they are, in no particular order
ABB (ABBN) weekly
Adecco (ADEN) monthly
Adecco (ADEN) weekly
Julius Baer (BAER) monthly
Julius Baer (BAER) weekly
Richemont (CFR) monthly
Richemont (CFR) weekly
LafargeHolcim (LHN) monthly
LafargeHolcim (LHN) weekly
Swisscom (SCMN) monthly
Swisscom (SCMN) weekly
SGS (SGSN) monthly
SGS (SGSN) weekly
Swatch Group (UHR) monthly
Swatch Group (UHR) weekly