History Says Bet On This Big Bank Bounce

C options traders have been more bearish than usual

Managing Editor
Mar 25, 2019 at 2:23 PM
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Banking giant Citigroup Inc (NYSE:C) is extending last week's weakness -- down 0.6% at $60.63, and pacing for a fifth straight loss -- after a dovish Fed and an inverted yield curve created headwinds for the financial sector. However, the stock remains 16% higher year-to-date, and its recent pullback has it trading near a historically bullish trendline. Per data from Schaeffer's Senior Quantitative Analyst Rocky White, now may be the perfect time to jump on C's next leg higher.

Specifically, Citigroup stock is within one standard deviation of its 80-day moving average after a lengthy stretch above it - defined as having traded above the trendline 60% of the time within the past two months, and in at least eight of the past 10 trading days. In the 11 other times this signal has sounded in the past three years, the security was positive 64% of the time one month out, averaging a gain of 4.65%. At C's current perch, a surge of the same magnitude would put the shares just above $63.40.

Daily C with 80MA Pullback

Looking further, analysts have had no trouble looking at the bright side of C stock. As of last Friday's close, all 14 covering firms sported a "buy" or better rating, including 13 "strong buys." Furthermore, the stock's average 12-month price target of $77.15 stands at a 27% premium to current levels.

Options traders, on the other hand, have been more bearish than usual in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Citigroup's 10-day put/call volume ratio of 0.91 ranks in the 91st annual percentile. While this shows calls outweigh puts on an absolute basis, the rate of put buying relative to call buying has been accelerated.


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