Citigroup Inc. (C) has a winning streak of beating earnings per share (EPS) estimates in 20 consecutive quarters. Even so, the stock is down 53.1% year to date and in bear market territory at 54.9% below its 52-week high of $83.11 set on Jan. 14. The stock is up 17.2% from its March 18 low of $32.00.

Citigroup stock is cheap, with a P/E ratio of 5.18 and a dividend yield of 5.20%, according to Macrotrends. The bank is the fourth largest of the four money center banks that are considered "too big to fail."

Status of banking system based on fourth quarter 2019 FDIC data

Fourth quarter 2019 net income came in at $55.2 billion, down 6.9% year over year. Almost half of the banks insured by the Federal Deposit Insurance Corporation (FDIC) reported declines in net income.

The return on assets ratio for the banking system fell to 1.2%, down from 1.33% from the fourth quarter of 2018. The banking system was hit by reduced net interest income and by an increase in non-interest expenses. In addition, net interest margin fell to 3.28% in the fourth quarter, down from 3.48% in the fourth quarter of 2018.

The daily chart for Citigroup

Daily chart showing the share price performance of Citigroup Inc. (C)
Refinitiv XENITH

The daily chart for Citigroup shows the formation of a "golden cross" on May 8, 2019, when the 50-day simple moving average moved above the 200-day simple moving average, indicating that higher prices would follow. This buy signal gave investors the opportunity to buy the stock on weakness to the 200-day simple moving average at $65.50 on May 13.

The chart shows numerous other buying opportunities at the 200-day simple moving average all the way to $65.12 on Oct. 3, 2019. This began a momentum run that continued until the stock set its 52-week high of $83.11 on Jan. 14, 2020.

The semiannual pivot at $79.78 was a magnet between Jan. 6 and Feb. 12, when it failed to hold at that day's close. The stock has been below its 50-day simple moving average since Feb. 21. The 200-day simple moving average failed to hold on Feb. 25, ending the "golden cross" buy signal.

The stock then cascaded down to its March 18 low of $32.00. Today, the upside potential should be limited to the stock's second quarter risky level at $56.10 and to its monthly risky level for April at $58.26.

The weekly chart for Citigroup

Weekly chart showing the share price performance of Citigroup Inc. (C)
Refinitiv XENITH

The weekly chart for Citigroup is negative but oversold, with the stock below its five-week modified moving average at $54.12. The stock has been below its 200-week simple moving average, or "reversion to the mean," at $64.68 since the week of Feb. 28.

The 12 x 3 x 3 weekly slow stochastic reading slipped to 19.90 last week, falling below the oversold threshold of 20.00. At its January high, this reading was above 90.00, which had the stock in an "inflating parabolic bubble" formation. This led to the bear market decline. 

Trading strategy: Sell Citigroup shares on strength to the quarterly and monthly risky levels at $56.10 and $58.26, respectively.

How to use my value levels and risky levels: The stock's closing price on Dec. 31, 2019, was an input to my proprietary analytics. Semiannual and annual levels remain on the charts. Each calculation uses the last nine closes in these time horizons.

Second quarter 2020 and monthly levels for April were established based upon the closing price on March 31. New weekly levels are calculated after the end of each week, and new quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year, while annual levels are in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.

How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings was based upon backtesting many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the last 12 weeks of highs, lows, and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading, and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00, with readings above 80.00 considered overbought and readings below 20.00 considered oversold. A reading above 90.00 is considered an "inflating parabolic bubble" formation, which is typically followed by a decline of 10% to 20% over the next three to five months. A reading below 10.00 is considered "too cheap to ignore," which is typically followed by gains of 10% to 20% over the next three to five months.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.