technical highlights on citigroup c watch the key resistance at 48 0049 70 for another potential dow

This week is a big one for U.S. financials firms as the major financial institutions have kick-started their respective Q1 2016 earnings reports. As a whole, analysts surveyed by Factset (as per reported on 08 April 2016) expect the U.S. Financials sector to report a -10.9% y/y for Q1 2016.

The Q1 2016 earnings results so far for the major financial institutions (source: Briefing.com):

1)      JP Morgan (JPM) – 1.35 versus 1.26 consensus  (beat expectations)

2)      Bank of America (BAC) – 0.21 versus 0.21 consensus (in line)

3)      Wells Fargo (WFC) – 0.99 versus 0.98 consensus (slightly beat expectations)

4)      BlackRock (BLK) – 4.25 versus 4.30 (below expectations)

A pretty mixed picture so far but interestingly all these stocks even BlackRock which missed its Q1 2016 earnings expectation have managed to stage a rally after their announcements and closed higher in line with the current broad based positive sentiment seen on the benchmark S&P 500. Since the start of this week on 11 April 2016, the weekly performance of the Financials is the best among the sectors as it racked up a current gain of 3.99%, thus driving a positive feedback loop (momentum) in U.S. financial stocks.

Citigroup (C) will report its Q1 2016 earnings today, 15 April 2016 before the open. The consensus stands at 1.05 which is a reduction from the same period a year ago at 1.52 and last quarter, Q4 2015 earnings at 1.06      

Let’s us take a deep dive into Citigroup from a technical analysis perspective

(Click to enlarge charts)

Key elements

• The relative strength chart of the Financials has continued to underperform the benchmark S&P 500 and in relation to its peers, Citigroup’s 12 month rolling return of 15.3% is the weakest (see first & second charts).
• The long-term chart of Citigroup has started to show of weakness as it has transited from a major cyclical bullish trend in place since October 2011 low of 21.40  to a major cyclical bearish trend. Firstly, it has failed to have a clear bullish break above the major swing high of 54.30 printed in August 2009 and reintegrated below it as well as broke the major trendline support that has linked the higher lows since Oct 2011. Current price action is still being capped a trendline resistance that has linked the lower highs since July 2015 now at 49.70 (see the third chart)
• The 49.70 trendline resistance also confluences closely with the 48.0 level defined by the pull-back resistance (in red) of the former major ascending support from October 2011 low and pull-back resistance of the former support of the “Expanding Wedge” bearish breakout (in dotted purple) (see the third chart).
• The 49.70 trendline resistance also coincides with the 1.00 Fibonacci projection from  11 February 2016 low (see the fourth chart).
• The recent rally from 07 April 2016 low has been accompanied by an increasing volume and the weekly RSI oscillator is still showing room for further upside before reaching its extreme overbought level. These observations suggest that short-term upside momentum remains intact and the stock may see a further “residual” push up in price action.

Key levels (1 to months)

Pivot (key resistance): 48.00/49.70

Supports: 39.95 & 34.53

Next resistance: 56.30/46

Conclusion

The major bearish trend for Citigroup (C) in place since July 2015 high remains intact. However, on the shorter-term upside momentum remains intact. Thus, Citigroup may see a “residual” push up first  but as long as the 48.00/49.70 pivotal resistance is not surpassed, Citigroup is likely to see another potential downleg towards 39.95 before targeting the 11 February 2016 swing low of 34.53 in the first step.

On the other, a clearance above the 48.00/49.70 pivotal resistance may invalidate the major bearish trend to see a further squeeze up towards the next resistance at 56.30/46

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