Back in December Citigroup had the look of a stock that was ready to explode. It lit the fuse with a move over our trigger at $54 on Jan. 6, and — full of promise — I bought it according to the original plan written here then.
But the fuse fizzled out three days later and it fell back into a technical mess.
C stock’s plunge was halted by the simple moving averages (SMA) and it has been moving sideways ever since. (The contest stipulates a yearlong hold, but fortunately in real life I use stop losses and sold for a small loss as it broke below 52.)
I have kept watching C stock since that early-January swoop-and-swoon, and it has the same promise as it did in December … technically speaking, that is. The long-term chart still is primed for a large break higher out of a base when it does breech and hold above 54.
The macro environment also continues to look promising on some fronts. The economy is still slowly growing, which should lead to a steepening Treasury curve — a positive for banks. And as was widely expected, the Federal Reserve has embarked on the taper.
That’s not to say C stock doesn’t face some headwinds. There have been no signs of inflation, and that is still keeping the curve relatively flat. Also the Fed stress test results have suggested Citigroup to be a floundering mess internally. It was one of a handful of banks that failed — the upshot of which is that Citigroup could not increase its dividend or buyback, both of which would have benefited the stock price. The stock price reacted by falling back to the year lows, just as it had recovered and was moving above the SMAs.
Bottom line, I am still bullish on the long-term technical and macro setup but the fundamental picture seems to be falling apart. This place is so bad that many are now calling for the breakup of the company to avoid some kind of disaster.
If C stock should regain its footing and move back over 54 it is still a good buy technically, but a breakdown below 46 moves the technical view to a short position. Just sit and watch until we get a breakout or a breakdown.
At the time of publication, Harmon had no position in C stock.