C stock pulled back to its 80-day moving average this week
Citigroup Inc (NYSE:C) is up 1.3% to trade at $75.59 today, after receiving a price-target hike to $86 from $83 at Credit Suisse. Despite touching a nine year high of $77.92 on Dec. 4, the banking concern has stumbled into 2018, finishing lower in six out of the last ten sessions. The next few weeks will be critical for Citigroup stock, with a slew of big bank earnings set to start rolling in. Thankfully, C's recent pullback might have bullish implications for the coming months.
C stock recently came within one standard deviation of its 80-day moving average, after nearly eight months above the trendline. After the last nine pullbacks of this nature, the equity was higher one month later 67% of the time, per data from Schaeffer's Senior Quantitative Analyst Rocky White. Furthermore, the shares averaged a one-month gain of 5.29% after these technical signals. A similar rally in the next month would put Citigroup stock a chip-shot from the $80 level for the first time since the 2008 financial crisis.
Options traders have stayed optimistic, too, as call buying has more than doubled put buying during the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX. And even though the January 2018 70-strike put saw the largest increase in open interest during this time frame, the majority of the activity at this strike was of the sell-to-open kind, based on data from the major options exchanges. This indicates options traders are expecting Citigroup stock to hold above $70 through the next two weeks, when the contracts expire.
Now is an ideal time to buy options on the bank stock. Its Schaeffer's Volatility Index (SVI) of 21% ranks in just the 3rd percentile of readings from the past year. This means short-term options are pricing in unusually low volatility expectations at the moment.