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What's Happening

Financial giant Citigroup ( C ) will announce fourth-quarter results on January 16. Analysts expect earnings of $1.18 per share. During the same period last year the company earned $1.14, and the stock has gained 13.0% since the end of June.

Technical Analysis

C was recently trading at $75.56, just $2.36 below its 12-month high and $20.33 above its 12-month low. Technical indicators for C are bullish with a strong upward trend. The stock has recent support above $74.00 and recent resistance below $76.25. Of the 17 analysts who cover the stock, 10 rate it a "strong buy", one rates it a "buy", five rate it a "hold", and one rate it a "strong sell". C gets a score of 71 from InvestorsObserver's Stock Score Report.

Analyst's Thoughts

Bank stocks have been hot over the last year, and with interest rates slowly rising, and a strong overall economy, the outlook remains bright for the sector moving forward. Industry heavyweights JP Morgan ( JPM ) and Wells Fargo ( WFC ) have both already reported better than expected numbers for the most recent quarter, which is a good indication that Citigroup could also post a positive earnings surprise. The Street has a whisper number of $1.23 for the quarter, which is four pennies higher than the general consensus. Citigroup has posted positive earnings surprises the last 11 quarters, and another beat should push shares higher. The stock has a P/E of just 14.5, and analysts forecast earnings to rise 12.1% per annum over the next five years. As interest rates continue to rise, and the overall economy builds steam, the financial sector will surely remain a favorite on Wall Street.

Stock Only Trade

If you're looking to establish a long stock position in C, consider buying the stock under $75.50. Sell if it falls below $68.00 or take profits if it gets to $86.80.

Bullish Trade

If you want a bullish hedged trade on the stock, consider a March 65/70 bull-put credit spread for a 45-cent credit. That's a potential 9.9% return (57.3% annualized*) and the stock would have to fall 6.8% to cause a problem.

Bearish Trade

If you want to take a bearish stance on the stock at this time, consider a March 85/90 bear-call credit spread for a $0.25 credit. That's a potential 5.3% return (30.5% annualized*) and the stock would have to rise 12.8% to cause a problem.

Covered Call Trade

If you like the stock, but wish to lower your cost basis on a new position, you may want to consider a March $77.50 covered call. Buy C shares (typically 100 shares, scale as appropriate), while selling the March $77.50 call for a debit of $73.65 per share. The trade has a target assigned return of 5.2%, and a target annualized return of 30.7% (for comparison purposes only).
Originally published on InvestorsObserver.com


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of NASDAQ, Inc.

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