Citigroup Inc. (C) stock has rallied to an eight-year high this week while rivals remain stuck within 10-month trading ranges, marking the next stage of a long-term term uptrend that could accelerate following this week's Federal Reserve interest rate decision. It is quite the turnaround, given the stock's persistent laggard behavior through most of the current bull market cycle. In many ways, this rally finally closes the door on the 2008 economic collapse, just in time for the new administration to reduce regulations put in place in the wake of that crisis.
The banking sector broke out and lifted to multi-year highs following the November 2016 election, stalling in March 2017 because the pace of interest rate hikes fell below aggressive expectations. The Fed could now signal its intentions to raise rates in December, adding to sector buying power while this industry leader gathers the momentum needed to complete a bullish run-up to the triple digits. (See also: Why Citigroup's Shares Could Rise 50% to $100.)
C Long-Term Chart (1990 – 2017)
Citigroup's long-term chart levels are skewed by the May 2011 1-for-10 reverse split that it needed to maintain liquidity following the brutal bear market. The stock broke out above resistance at $29.38 in 1990 and entered a powerful trend advance that continued into the August 2000 high at $551.48. It split seven times during this fruitful period, driven by the opening of new markets after the fall of communism as well as rapid technological advances.
The stock relinquished half its value after the dotcom bubble burst, dropping to a three-year low at $228.32 in the second half of 2002, ahead of a slow-motion recovery wave that finally reached the prior high in January 2007. The uptick posted an all-time high at $570.00 and turned lower in a mild decline that accelerated into a death spiral in the second half of 2008, finally coming to rest at a multi-decade low in the single digits. (For more, see: Citigroup at Cusp of Historic Breakout.)
A 2009 bounce to $54.30 marked resistance, while five rally attempts between 2010 and 2015 failed at that formidable barrier. The stock sold off to a climactic three-year low at $38.31 in the first quarter of 2016, while the subsequent recovery wave yielded a November breakout. It tested new support for more than six months, ahead of a strong buying impulse that finally confirmed the breakout in June 2017.
C Short-Term Chart (2015 – 2017)
A 2015 rally lifted above 2009 resistance in July, posting a six-year high at $60.95, ahead of a failed breakout that set the stage for the 2016 selling climax. The late 2016 breakout stalled at the 2015 high, yielding a rectangle pattern on top of new support. It cleared rectangle resistance in June 2017 while its peers continued to struggle within range-bound patterns, lifting the stock into its unusual leadership role. (See also: How Citigroup Makes Its Money.)
On-balance volume (OBV) topped out in January 2014 and entered an aggressive distribution wave that ended in early 2015, yielding a lower July high. It posted an even lower high following the 2016 breakout, setting off a bearish divergence that remains in force as we head into the fourth quarter of 2017. So far at least, this lack of sponsorship has failed to slow or stall the strong uptrend.
A Fibonacci grid stretched across the final wave of the bear market between September 2008 and March 2009 places the .382 retracement level at $94, marking a logical reward target for the current uptrend. In turn, this predicts generous upside in the coming months, despite outsized gains so far in 2017. For now, market players can buy pullbacks to new support in the mid-$60s or chase the rally with a tight stop-loss. (To learn more, see: Strategies for Trading Fibonacci Retracements.)
The Bottom Line
Citigroup has lifted into a banking sector leadership role, attracting a steady capital flow that should support continued upside into harmonic resistance at the edge of the triple digits. This week's Fed meeting could underpin that rally if the governors set a December date for the next rate hike. (For additional reading, check out: Citi to Double by 2022: Wells Fargo.)
<Disclosure: The author held no positions in the aforementioned securities at the time of publication.>