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

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(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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