Banking stocks lifted last Friday on the back of rumors that the proposed fee by the Justice Department that Deutsche Bank AG (USA) (NYSE:DB) is to pay for shenanigans around mortgage securities could be close to the $5 billion range as opposed to the initial $14 billion. While DB stock merely bounced off its already beaten-down levels on Friday, other banking stocks like Citigroup Inc (NYSE:C) saw a move that had the characteristics of a more hopeful rally at some point in the fourth quarter and possibly into the end of the year.
When I last discussed the state of C stock on June 6, I offered a near-term bearish view that about two weeks later saw the stock tumble and reach my laid out price target around the $40 level.
Although Citigroup stock then rallied nicely off the late-June lows, when viewed through a multi-month lens, C stock has hardly moved much if at all. However, the bulls increasingly point to a constructive consolidation phase in the stock that ultimately could resolve higher.
Although I often discuss it in this column, I will continue to point it out: without at least some participation or leadership by the banking sector, the broader stock market at the margin finds it challenging to push higher on a sustainable basis.
While the banking sector did see some relative out-performance versus the broader U.S. stock market off the late-June reaction lows, this leadership tapered off in recent weeks and thus kept the broader stock market largely range-bound.
C Stock Charts
Looking at the multi-year weekly chart of C stock, we see that since the stock broke below the former support line (black) as well as below its red 200-week simple moving average this past January, it has formed a series of higher lows against its February lows. Yes, Citigroup stock remains below resistance, but the longer it consolidates and coils up just underneath the $48 area (i.e., former support) the better the odds become of a push/break back above there.
On the daily chart, note that since breaking back above its red 200-day moving average in August, C stock has further tightened its trading range and that just below diagonal resistance from the 2015 highs. So far, Citigroup stock has formed two higher lows versus its February lows in June and again in early August. If and when C stock manages to break past resistance now around the $48 to $49 area, then another higher low would be confirmed and the stock could be on its way toward the mid-$50s through a multi-month lens.
As a side note, corporate earnings season is just about to kick off and Citigroup is scheduled to report its latest financial results on Oct. 14, which surely is a date to circle. As always, keep in mind that how a stock reacts to news is more important than the news itself.
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