Citigroup Nearing Test Zones
Macro news was at work today, showing
more evidence of economic slowdown. That’s a plus for financial stocks as it
provides added pressure on the Federal Reserve to ease sooner rather than later.
The Commerce Department reported
November retail sales dropped 0.4% to a seasonally adjusted $271.69 billion. The
Wall Street consensus was for a modest sales increase. Consumer sales account
for a third of gross domestic product. So these numbers raise the possibility of
an actual contraction in GDP in the current quarter.
Ignore the hand wringing from the
talking heads. Keep your contrarian sensibility alive. This slowdown was induced
by the Fed, and now that it’s under way, it will help bring the Fed around to
stimulating the next expansion phase. Financial stocks appear to be discounting
that scenario.
Citigroup
(
C |
Quote |
Chart |
News |
PowerRating) has a ways to go
before completing a base, but the stock is acting well. The relative strength
line is nearing its Oct. 13 high (see Point A
in chart). Twice before, the stock lost steam as it approached the downtrend
line illustrated in the following chart. I would need to see the stock overcome
that trendline as well as resistance at 56 a share.Â
The top field of all stock charts in
this commentary uses a logarithmic price scale and displays a 50-day price
average in red. In the
second field, a blue relative strength line represents the displayed security’s
price performance relative to the S&P 500. The third field displays vertical
daily volume bars in black with a 50-day moving average in blue for volume.
All stocks are speculative. In
any new trade, reduce your risk by limiting your position size and setting a
protective price stop where you will sell your new buy or cover your short in
case the market turns against you. For an introduction to combining price stops
with position sizing, see my lesson,
Risky Business. For further treatment of these and related topics,
check out the Money
Management area of TradingMarkets’ Stocks Education section.