Strangling Citigroup

Written By: DragonFly Capital

Citigroup reported earnings on Monday, tax day, what seems eons ago, and ran higher. We traded it in the premium area for a good gain. But it has interest now because of the Bearish Butterfly shown in the weekly chart below. This pattern has a target for a reversal at 48.90, a point it is falling just short of. On a reversal lower it has a target of 38.40, very near the 200 week Simple Moving Average (SMA) on this chart. The Relative Strength Index (RSI) is making lower lows and the Moving Average Convergence Divergence


(MACD) indicator is starting to roll lower. Seems a break under 42.70, whether it hits the Butterfly target or not, is a good longer term short entry. It could also just fake out every one and cause that pattern to fail with a move over 51.50 Either way it has potential. One way to play this is to buy the July 42/50 Strangle right now. This is offered at $ 2.10 late Thursday (4.65%) and has 3 months to play out. The great news is hat this stock also has weekly options so that you can sell a weekly Strangle against it each week for 13 weeks to recoup you cost while you wait for a big move, expecting them to expire each week. If you do not have time to watch every week that is no problem, do it less frequently.

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