Citigroup (C) is scheduled to announce its latest earnings numbers ahead of Friday’s opening bell, and I believe that there could be further weakness in this financial name.
The suits-and-ties are expecting a profit of $1.09 a share on revenue of $17.9 billion. Citigroup has topped estimates during the past three quarters by $0.07, $0.17 and $0.12, respectively, but it missed by $0.03 in the year-ago period.
Revenue for C stock has also come in higher for two straight quarters, but it missed expectations during the two prior quarters.
Given the hit-and-miss forecasts, it’s hard to say how shares will react to the news, which is why earnings trades are so tricky. Forward guidance will likely dictate if lower lows or higher highs come into play.
The C Stock Chart
The technical picture for Citigroup is a little clearer, as the major moving averages are in a sloping downward trend. Shares tested a fresh 52-week low of $45.93 intraday before the strong reversal into Monday’s closing bell. Another move below $46 ahead of Thursday’s close might be a golden clue that shares could be headed lower.
Bullish traders could target the C February $50 calls (C160219C00050000) if shares are showing continued momentum ahead of the announcement for a possible push past $50. This would require a 6%-plus move from current levels. These options would return 100% or more if shares trade past $51.44, technically, by mid-February.
If you want some lotto action, the C January $48 calls (C160115C00048000) could be targeted if Powerball isn’t your game. These options would double if shares trade past $48.92, technically, ahead of this Friday’s close.
These options are more of a gamble, as they expire in three days, which is why they are a much riskier bet than the bullish February call options.
While I’m interested in a possible longer-term play on Citigroup, I would rather spend a few bucks on a lottery ticket to win the $1.5 billion jackpot than risk trading the January options.
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