Still Time to Buy the CHF?
Follow-up No. 6 / October 2, 2007
The ten-year picture
The long-term trend in above chart is nicely depicted with the EMA(50) (green line) and reveals that such trends often last several years. Within this long-term trend, counter movements take place which can last one year or longer. Such a counter movement occurred in 2005 and lasted a bit longer than one year when the general up-trend was resumed.
It would evidently be very profitable to be in a position to accurately guess beforehand when such counter movements or even a trend-reversal are likely to set in. We can determine, examining above graph, that once price start to move away in excess of 10 to15% from the monthly EMA, such a counter movement and/or trend-reversal becomes an increasing probability.
At present, the Swiss Franc trades roughly 10% above the monthly EMA(50) for which reason we can conclude that there is some up-side potential left before a significant correction will start developing.
The medium-term picture
While the EUR has made new all-time highs against the USD, the CHF remains below the high reached at the end of 2004, reflecting weakness of the CHF against the EUR. In times of financial turmoil, the CHF may well regain its role as a "safe haven" and make good lost ground.
While a completed Head-and-Shoulder formation tells you explicitly that a trend reversal has occurred, it is of little use if you wish to get out at the top of such a reversal. During the 2002-2005 Euro-bull-market you would however have been well-advised if you had sold each time prices moved to a level approaching 10% above the weekly EMA (50).
At present, prices remain at a 5% level above the EMA. This relatively low reading compared to the EUR reflects the weakness of the CHF against the EUR. Therefore, once the EUR will go through a correction, so will the CHF unless speculators start switching out of the EUR into the CHF.
The short-term picture
Those who have bought CHF against the USD should keep their positions until we have clear indications of too much enthusiasm. Our target range for such circumstances is 89 to 91 for the coming months.
Day-traders obviously have another prospect. We, for our part, prefer to guess the medium-tern trends.
Our recommendations were valid at the time of writing, viz. at
and may no longer be relevant at the time of reading.
Peter Zihlmann
www.pzim.com
www.timeless-gold.com
invest@pzim.ch
Tel.+41 44 268 51 10
Mobile +41 79 379 51 57
October 1, 2007
Disclosure: The author has not been paid to write this article, nor has he
received any other inducement to do so. The author is a shareholder in the
company and will benefit from any increase in the company's share price.
Disclaimer: The author's objective in writing this article is to invoke an
interest on the part of potential investors in this stock to the point where
they are encouraged to conduct their own further diligent research. Neither
the information, nor the opinions expressed should be construed as a
solicitation to buy or sell this stock. Investors are recommended to obtain
the advice of a qualified investment advisor before entering into any transactions
in the stock.
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