Citigroup (
C
)
finally broke out of a long-term consolidation pattern. This
should have owners of the mega bank smiling because that breakout
may result in a 27% rally.
ChartWatch first noticed that something
big was brewing
in the chart last month. The shares had traded in a channel
pattern (blue lines) with an upside breakout targeting $51.50.
Though a breakout hadn't occurred, one looked probable.
The key to the breakout was the ability of Citi to hold $32.
Buyers protected that level all December. In fact, the shares
have rallied all month, never dipping below $34 in November.
This chart shows the price of
C
shares along with an important support level to
monitor.
Though the shares already hit
my $40 target
, an extension of the recent advance looks likely, as banks have
rallied nicely throughout the month. In fact,
the financial index
is up 9.5% since mid-November.
Stocks within the same sector tend to move together. So this
latest rally from most big bank stocks strengthens the case that
Citi will trade higher.
Bullish investors want to see buyers support $35. Though $38.50
should be a near-term support level, the $35 zone is much more
important to hold. A failure of buyers to support this area may
indicate the recent positive momentum was a trap and the stock is
heading back down to $25 (this appears to be a low-probability
event).
Fears of
the fiscal cliff
may spook some investors out of the stock, sending the shares
lower. However, until $35 fails to act as support, the stock is
well positioned to stage a rally up to $51.50.
New buyers may want to wait for a pullback. However, don't wait
too long. This expected move may conclude as early as March.
Equities mentioned in this article: C
Positions held in companies mentioned above:
none
