Bank Stock 'Buy' Signal Has Never Been Wrong

C's combination of cheap options and recent highs has been a bullish signal in the past

Managing Editor
Jan 24, 2024 at 1:45 PM
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Bank stock Citigroup Inc (NYSE:C) is up 4% in 2024, but has cooled off since scraping a nearly two-year high of $54.74 on Jan. 4. Thanks to a 1% post-earnings pop on Jan. 12, C is on the move again and could make another run at multi-year highs, if past is precedent. 

Citigroup stock's recent highs come amid historically low implied volatility (IV), which has been a bullish combination in the past. Per Schaeffer's Quantitative Analyst Rocky White, there were three other signals over the past five years when C was trading within 2% of its 52-week high, while its Schaeffer's Volatility Index (SVI) stood in the 20th percentile of its annual range or lower. 

This is the case with the stock's current SVI of 23%, which stands in the low 11th percentile of annual readings. Per White's data, the shares were higher one month later all three times after the signal, averaging a 5.1% pop. From its current perch at $53.39, a move of similar magnitude would place the stock above $56 for the first time since March 2022.

C Stock Chart

Keep an eye out for a shift in sentiment among brokerages. Of the 21 covering the bank stock, 14 maintain "hold" or "strong sell" ratings. With the bank sector buzzing as business activity picks up and potential interest rate cuts from the Federal Reserve loom, now may be the time to purchase calls on C. 

 

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