Citigroup Earnings Preview: Here’s the Dip to Buy

Citigroup stock has been on fire over the past few months. If we get a dip after the earnings, C stock is a buy. The charts make clear the level to watch.
Publish date:

Citigroup  (C) - Get Report, JPMorgan  (JPM) - Get Report and Wells Fargo  (WFC) - Get Report will kickstart fourth-quarter-earnings season on Tuesday before the open.

For years, the bank stocks have been climbing at a snail's pace. After a robust reaction to the 2016 election, which fired up a multimonth rally in the sector, the group has had trouble rallying with much momentum.

Despite rising dividends, buybacks and profits, bank stocks have maintained low valuations and found little upside traction. That is, until the third quarter of 2019.

In September, JPMorgan, Citi and others began to spike, and while the move looked promising, a pullback at the end of the month and many layers of looming resistance had investors skeptical.

Those doubts were erased in the fourth quarter when Citigroup rallied in 11 out of 13 weeks. Now what? Let’s look at the charts.

Citigroup and JPMorgan are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells C or JPM? Learn more now.

Trading Citigroup Stock

Weekly chart of Citigroup stock. 

Weekly chart of Citigroup stock. 

From the August lows to the December highs, Citigroup stock rallied almost 35%. Over the past few weeks, though, it’s clear that the stock is losing momentum. 

Will the recent rest be enough for the bulls to bid Citigroup higher on earnings, provided the results are good enough?

That’s the question investors are trying to answer now, even though the shares are down just 2.5% from the recent high. While the bulls would certainly enjoy more upside, a slightly larger unwind at this point would be far from unhealthy.

A dip to the 10-week moving average would send Citi stock down to roughly $77.30, while a slightly larger decline, to the $76 area, would represent a pullback of 6.5%. 

More important, a decline to $76 would send Citigroup back to a very important level of resistance that persisted for two years.

At the start of November, Citigroup shares ran into this level but couldn’t break out until December. A pullback to this former resistance area that holds as support would be a very meaningful development for the bulls.

Should it hold, it surely would represent a reasonable risk/reward for investors and puts the recent high of $81.26 back on the table, with more upside above that mark.

If Citigroup stock pulls back to this level and fails to hold it as support, see if the $70 to $72 area buoys, should it dip that far. There it should also run into the 50-week moving average.