Thursday, June 17, 2010

Citigroup Trapped by Moving Averages As Option Speculators Pour Money In (C)

The 50-day Exponential Moving Average is at four bucks even, the 20-day at $3.91. The stock is at $3.95: Here's the three month chart:
Chart forCitigroup, Inc. (C)

The company reports earnings on July 16, which is also an options expiration.
Although the prior quarter's $4.4 Bil probably won't be repeated because the $0.15/share had a big chunk of trading gains, expect the company to use similar verbiage:
"Loan losses coming down with growth of top-line revenue speaks to the overall recovery,"...
They reported on April 19, the Monday after op-ex.

From What's Trading:
Citi (C) June 4 call is the most actively traded equity options contract today. 50K now traded. Shares are trading up one cent to $4 even and, at almost 1 million contracts, the Citi June 4 call has the second largest open interest of any June contract heading into the expiration (second only to the Citi June 5 call). Consequently, some closing action is likely driving a lot of the activity, and some premium sellers are collecting a few pennies in recent trade. Some might also be rolling to the Sep 4 calls, which traded 47.3K and are today’s second most actively traded equity options contract.
Clear out all those $5's, pop through the 50-day and $4.40 looks easy.
Catch a decent earnings number and 25% in a month is doable, although it will take some buying enthusiasm, in the face of Treasury overhang.

There is reason to believe that the Treasury has an SEC opinion to the effect they shouldn't sell in the window immediately preceeding earnings, in which case we'd have a mystery/history set-up.
At least that's what happened last quarter.