The Bank Stock Flashing 'Buy'

Citigroup stock's 80-day moving average has been a launching pad

Nov 17, 2017 at 3:33 PM
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Financial stocks have taken a breather lately, amid concerns about tax reform and the surprise departure of Consumer Financial Protection Bureau (CFPB) Director Richard Cordray. However, one bank stock could be a bargain at current levels, if past is prologue: Citigroup Inc (NYSE:C). Below, we'll explain why C stock could be flashing "buy" right now.

Since notching a post-financial-crisis high of $76.14 in mid-October, the shares of Citigroup have backpedaled about 5.6% to sit at $71.74. However, the round-number $70 area has emerged as support, and represents two times C stock's February 2016 closing low. Plus, the security's 80-day moving average has ascended into the $71 area, and this trendline has been a launching pad for the shares of late.

Specifically, Citigroup stock has been higher about two-thirds of the time one month after a pullback to the 80-day, following a lengthy stint above this trendline. What's more, C stock has averaged a one-month gain of 5.54% after its last eight tests of the moving average, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. A similar rally over the next month would place C around $75.71 -- within striking distance of new highs -- going into 2018.

citigroup stock chart

Despite the equity's long-term ascent, near-term options traders are more put-biased than usual. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.88 ranks in the 80th percentile of its annual range. What's more, Citigroup put options are flying off the shelves at twice the average intraday clip today, with one speculator seemingly rolling November 72.50 puts to December 72.50 puts ahead of front-month expiration. Should C once again jump off its 80-day, an exodus of options bears could push the bank stock even higher.

 

 

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