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Chart Of The Day: Citigroup Stock Is Breaking Down

By Investing.com (Pinchas Cohen/Investing.com)Stock MarketsNov 17, 2021 09:28AM ET
www.investing.com/analysis/chart-of-the-day-citigroup-stock-is-breaking-down-200608653
Chart Of The Day: Citigroup Stock Is Breaking Down
By Investing.com (Pinchas Cohen/Investing.com)   |  Nov 17, 2021 09:28AM ET
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On Tuesday, while the broader market, including all four US major indices and even financial sector peers all gained, shares of Citigroup (NYSE:C) slumped.

The stock lost almost 1.5% yesterday, to close at $67.74. It was the equity's second straight day of losses. As well, C closed $12.55 lower than its 52-week high ($80.29), which it hit on June 2, for a 16% loss in value since that time. 

It's difficult to understand why shares of a New York City-based global financial services company would decline amid speculation the Fed will raise rates—the bread and butter of lenders—more quickly than expected, pressured by inflation. But other big banks fell too.

Still, Citi's stock lagged. While Wells Fargo (NYSE:WFC) shed almost as much as Citi, with a 1.4% selloff, JPMorgan Chase (NYSE:JPM) dropped by half that, with just a 0.7% retreat. And Bank of America (NYSE:BAC) rose almost 0.1%.

It's not clear why financials tumbled, but perhaps they were swept in by the retreating Reflation Trade over the last few days, as tech growth shares led markets. Or possibly this paradigm is signaling that investors are losing faith in the economic recovery. 

Whatever the fundamental case, technicals are providing a picture of weakness.

C Daily
C Daily

The stock is on the cusp of completing an H&S continuation pattern. It may have completed a rising flag yesterday, bearish after a $4.80 drop within just six sessions.

Note how the volume rose alongside the creation of the flagpole—the sharp move before the stock began to range. Then, volume dried up amid the flag's body formation. Finally, the breakout was accompanied by a jump in volume. Volume indicates where participation is, and since Oct. 22, it has been with the bears.

The 50 DMA crossed below the 200 DMA, triggering a Death Cross, a nasty technical indicator, suggesting continued weakening.

The Relative Strength Index fell below its rising trendline, showing a momentum breakdown with the overall rally since July 19. The RSI attempted to climb back above the line but failed. This momentum indicator is famous for providing early calls for breakouts, suggesting our H&S will complete.

We measure an H&S by its height, at its smallest point. Therefore, we measure the pattern from its $74.64 head to the breakout of its right shoulder, by our estimate at around $67.64, forming a $7 minimum objective to about $60.

Trading Strategies

Conservative traders should wait for a downside breakout to $65, with at least a 3-day filter. Then, they'd wait for a return move to retest the resistance.

Moderate traders would wait for penetration to $66 with a two-day filter in order to avoid a bear trap.

Aggressive traders could go short at will, provided they accept the higher risk that goes with moving before the rest of the market, with less confirmation. Money management is crucial. Here's an example:

Trade Sample

  • Entry: $68
  • Stop-Loss: $70
  • Risk: $2
  • Target: $60
  • Reward: $8
  • Risk:Reward Ratio: 1:4
Chart Of The Day: Citigroup Stock Is Breaking Down
 

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Chart Of The Day: Citigroup Stock Is Breaking Down

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Comments (3)
Felipe Daniel
Felipe Daniel Nov 17, 2021 10:12AM ET
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I still remember like it was yesterday week of November 8 when Mr Cohen wrote a short piece on gold that backfired
Pinchas Cohen
Pinchas Cohen Nov 17, 2021 10:12AM ET
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Wow, you're gonna write that every day? It didn't backfire. It's statistics. I hope you're not trading.
Felipe Daniel
Felipe Daniel Nov 17, 2021 10:12AM ET
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Pinchas Cohen I took the opposite side of your short call in gold. Starting to think you may have been paid.
Pinchas Cohen
Pinchas Cohen Nov 17, 2021 10:12AM ET
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Felipe Daniel  Paid by whom? The global gold reserve? And you think I know which way gold will go, or that I have influence? Buddy, I urge you to stop trading, or I guarantee you'll lose all your money.
Zawlat Boy
Zawlat Boy Nov 17, 2021 10:12AM ET
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yes
Zion Joe Ross
Zion Joe Ross Nov 17, 2021 8:08AM ET
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Business is business everyone keep working
Gershom Zvi
Gershom Zvi Nov 17, 2021 8:02AM ET
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Is this one of major stock investment of Warren Baffett ?
 
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