What happened?

Last week the shares of Citigroup lost more than 8% and got to important support area. Let’s analyze what is happening and whether the stock will be able to find strength for recovery.     

Why is it important?

In general

Citigroup is is one of the leading global banks that does business in more than 160 countries and jurisdictions. It’s also an important element of the US banking industry, hence its performance represents an important benchmark.  

For investors

As a bank, Citigroup is very sensitive to the policy of the Federal Reserve. The dovish switch of the central bank hit the US banking sector. The inverted yield curve and fears about potential future recession don’t improve the outlook.

In addition, the company has recently experienced troubles in Asia. Citi has ousted eight equity traders in Hong Kong and suspended three others after an internal investigation into dealings with some clients. This is surely damaging to the company’s reputation in Asia, especially the bank gets 40% of consumer banking revenue from outside of the US.

Moreover, Japan’s Securities and Exchange Surveillance Commission (SESC) announced on Tuesday that a fine of $1.2 million had been recommended against the British unit of Citigroup Inc (C) for manipulating prices of 10-year Japanese government bond futures.

All in all, it’s clear that Citigroup needs to improve its internal controls and mechanisms. The uncertainty about the global and the US economy which for now remains unresolved is a negative factor for the company as well. As a result, Citi’s shares may remain under pressure.

For traders

For now, the stock is trying to stay above February lows in the $61.00 area. If it fails to get above the 100-day MA at $61.50, it will enter the lower area. The further support is at $59.55 (200-week MA). The loss of this level will open the way for more downside. Resistance lies at $65.80 (50-week MA) ahead of the downtrend resistance line at $70.50.

The daily chart of Citigroup
Citigroup, daily chart