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ChartWatch: Something Big is Brewing

Andy Crowder

Citigroup (NYSE: C) is on the verge of a massive move. However, the chart isn’t tipping us off as to which direction the stock will take.

The shares reside within a huge channel (blue lines). Not only has this channel been in place for a while (15 months), it’s massive in size, ranging from $24.50 to $38.


http://stockcharts.com/c-sc/sc?s=C&p=D&yr=2&mn=0&dy=0&i=p46958238536&a=280637212&r=1354226560409

This chart shows the price of C shares along with an important channel pattern to monitor.

Citi’s stock is currently banging against channel resistance. If this resistance holds, the shares have a long way to fall within the current range. Alternatively, the shares may break out of the pattern, inducing a rally that could initially reach as high as $51.50.

Either way, it appears that a monster move is coming.

Bullish traders should watch to see if $38.50 breaks next month. A move beyond that price could provide the first signal that the shares are preparing to advance to $51.50.

Though $35 is a primary support area (read more about that here), bearish traders may want to watch the $32 zone more closely. Buyers would protect that level if the stock was preparing to rally. This means that any push below $32 is an opportunity to short the shares, profiting from a move lower to the bottom of the channel.

The stock has experienced a nice ride over the past four months. Citi will need to expand on that positive momentum if it expects to rally back up to its 2011 high.

Equities mentioned in this article: C

Positions held in companies mentioned above: none

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