Citigroup Reports Earnings Below Long-Term Pivots

Citigroup Inc. (C) is the fourth largest of the four "too big to fail" money center banks and has total assets of $1.398 trillion at the end of Q2, down from $1.407 trillion in Q1 2018. This continues a troubling trend in which the nation's biggest banks are reducing lending. Based on share price weakness, the risk is that this trend continued in the third quarter. Citigroup shares closed Wednesday, Oct. 10, at $69.95, down 6% year to date and in correction territory at 13.3% below the 2018 high of $80.70 set on Jan. 29. The stock is 8.7% above its 2018 low of $64.38 set on June 26.

Citigroup is set to report quarterly earnings before the opening bell on Friday, Oct. 12. Analysts expect the banking giant to report earnings per share between $1.67 and $1.73. As one of the four biggest banks, Citigroup is involved in all phases of banking in the U.S. and around the world. Consumer banking is expected to show solid growth, but that could be overly optimistic given the decline in total assets in the second quarter. The bank could be feeling a pinch in its credit card business given the fact that I know someone who responded to a credit card invitation that was turned down despite having a credit score above 700. There has also been a decline IPOs and other follow-up offerings. (See also: Citigroup Seen Dropping 10% on Lower Revenue Forecasts.)

The daily chart for Citigroup

Citigroup has been trading below a "death cross" since April 26, when the 50-day simple moving average fell below the 200-day simple moving average, indicating that lower prices lie ahead. These averages are now converged at $71.50 and $71.60, respectively. The horizontal lines on the chart at $72.47 and $73.43 are my semiannual and annual pivots, respectively.

The weekly chart for Citigroup

The weekly chart for Citigroup is negative, with the stock below its five-week modified moving average of $71.08. The 200-week simple moving average of $58.43 is below the market as the "reversion to the mean," last tested during the week of Nov. 4, 2016, when the average was $49.25. The 12 x 3 x 3 weekly slow stochastic reading its projected to decline to 64.16 this week, down from 70.92 on Oct. 5.

Given these charts and analysis, investors should buy Citigroup shares on weakness to my monthly value level at $61.85 and reduce holdings on strength to my semiannual and annual pivots of $72.47 and $73.43, respectively. (For additional reading, check out: Bank Stocks' Biggest Bull Goes Bearish on Financials.)