Trade of the Day: Citigroup Flags a Bullish Reversal
Citigroup (NYSE:C) recently reported earnings, and it, along with other large-cap banking stocks, have since firmly planted bullish reversals on their charts. This now sets up bullish near-term trading opportunities in C stock, as well as others.
Large-cap banking stocks have been fighting an uphill battle year-to-date despite being one of the most ‘loved’ groups of stocks for many institutional investors. While I personally see limited upside in these names through a multimonth lens, in the near-term a good reward to risk trade is setting up.
This is also a good place for me to remind ye faithful that a multi-time-frame approach to trading and investing in financial markets allows for vastly superior risk management of positions and thus to better and less volatile returns. I would encourage everyone, regardless of how near- or long-term their time frames are, to consider looking at charts in other timeframes before and during the life of a trade/investment.
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C Stock Charts
Moving averages legend: red – 200 month, blue – 100 month, yellow – 50 month
On the multiyear weekly chart, we see that C stock — despite its 20% drop from the January 2018 highs to the June lows all along — held its 2016 simple diagonal support line as well as its blue 100-week simple moving average, at least for now. In fact, in June this confluence area of technical support was almost tested to the penny.
The rally over the past couple of weeks has through this lens served as follow-through buying after testing the aforementioned support area. Barring any next meaningful bearish reversal on a weekly closing basis, this longer-dated timeframe now points C stock higher still.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
Moving on to the daily chart, we see that since October 2017 C stock has essentially traced out a big and potentially bullish consolidation pattern, marked by the two black lines. Note that the stock broke below its red 200-day moving average in March and has been below there ever since.
Over the past couple of trading sessions, C stock has marginally broken above the upper black line. Considering this move is not just happening in this stock but also in other large cap banking names my hunch is that the next upside price target could be around the red 200-day moving average or just north of there.
Traders could take advantage of such a “mean-reversion” move higher by buying the stock around $69.80 with a profit target around $73. Any material bearish reversal on a daily closing basis would be a stop loss trigger.
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