Citigroup 10-for-1 Reverse Split
Happy Monday Morning Citigroup shares. I haven't see you at this price since back in 2007! We are now back at $45 after a 10-for-1 reverse stock split got you here. What this means is that 10 shares of $C will be merged into one share, and holders of $C will own one-tenth as many shares. The price goes from $4.52 to $45.20 and outstanding shares will shrink from 29 billion to approximately 2.9 billion. Here is a Monthly post-split chart of $C with Bollinger Bands that show how volatility in the name has evaporated in comparison to recent years.
It still looks weird to me to see $Citigroup at $45.00. I'm certain that I won't be the only one getting this feeling today. Based on the lack of volatility, shown here by the narrowing Bollinger Bands, I would expect a larger than average move coming into the name sooner than later. The question to ask is, in which direction? The intermediate term chart below shows that the $50-$51 level (split-adjusted) has been major resistance for about 2 years now.
If we take a closer look at the daily chart below, we see shares consolidating between converging trend lines for the better part of 2011. The rising 200 day moving average with a declining 50 day moving average give us mixed signals for the overall trend. RSI tells us nothing actionable here. So there really is no solid trend to trade until one of the trendlines are taken out and direction becomes more definitive. The downtrend line going back to January has been tested 4-5 times now. The way I look at it, the more times a level is tested, the higher the likelihood that it breaks through. This is a key level that I want to watch this week.
The short term picture tells us a bigger move is on the way soon. The longer term picture tells us the same. I would not expect a major move to the upside in Citigroup shares until $51 is taken out. The next test of that level would be the 4th in 2 years. In my experience, the more tests, the better the chances for a breakout. Citigroup has potential here, but it's got some work to do.
Disclosure: I currently own $C shares in some customer accounts.