A Weekly Log and Normal View of Citigroup C July 31

Jul 31, 2009: 2:33 PM CST

A reader recently asked me for my take on Citigroup (C), as to whether or not the stock was perking up enough to warrant interest.  I thought we’d take a quick look at the Weekly Chart and note the differences in the Logarithmic and Arithmetic charts and note a key level for bulls to watch.

Citigroup (C) Arithmetic Chart:

The quick observation is that we’ve seen one of the most stellar and dramatic price drops of a major company – it should serve as a lesson to investors that “It Can’t Go Any Lower” is not the best mantra to have – it can go lower.

A key example is in mid to late 2008 when price had formed a four-swing (powerful) positive momentum divergence that completely failed to produce any upside action.  If sellers can shake off such ‘positive’ momentum, you know that the stock is going to go lower once it breaks the support from which the divergence formed (in this case, around $15.00).

Price bottomed at $0.97 just before a powerful rally ensued, taking price up so far to about $4.50, and price has inched its way down off that resistance level.

So far in 2009, the falling 20 week EMA has contained all price advances, despite significant volume surges (over 4 billion shares traded in one week at times) which could indicate accumulation, or the sense that “Gosh, prices of a ‘solid’ company are so cheap, I just can’t pass up buying here and holding for perhaps the next 5 or 10 years.”

All other lessons aside, I would watch to see if buyers can push price convincingly above the falling 20 week EMA (green) at $3.50.

Let’s compare the cleanliness of the Algorithmic (all dollar changes are equal) to that of the compressed Logarithmic Chart (percentage moves are equal).

Citigroup (C) Logarithmic Chart:

The Log chart in this case is going to overemphasize recent prices (lower prices) which are larger percentage moves than higher prices, in which case the left side of the chart is compressed beyond recognition – a trade-off.

There is a down-sloping (black) trendline I’ve drawn that connects three price lows and also has served as key resistance as it is coincided with the falling 20 EMA.

Without going into much other detail, I wouldn’t be interested at all in this stock unless bulls can break above $3.50 – until then, price still remains in a downtrend making lower lows and lower highs; the EMA structure is in the most bearish orientation possible; and price is convincingly beneath all EMAs.

It’s an interesting chart, nonetheless.

Corey Rosenbloom, CMT
Afraid to Trade.com

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2 Responses to “A Weekly Log and Normal View of Citigroup C July 31”

  1. Moolah Street Says:

    Sweeet. Thanks for the article! You rockkk.

  2. Moolah Street Says:

    Sweeet. Thanks for the article! You rockkk.