More write-downs today for Citigroup (underestimated in the first place). C is talking of cutting dividends by 40% which will scare fixed income investors. C is also commenting that perhaps the other big banks are on a similar path of underestimated write downs. The write-downs obviously have a fundamental effect on the company as their investment portfolios though the MBS holdings take further hits due to devaluation and have an effect on the already-deteriorating company balance sheet. This decreases the company's profitability and their cash flows devalue, making it less attractive to any sane investor, which shows by today's 2.92% sell-off.
Explanation of technicals from my chart:
- C had a nice trading channel built up but broke down below it during more financial trouble and the market correction.
- Now it seems it might be in a descending channel (although not confirmed cause it needs more time) or it's in the process of building another channel, out of which it broke down today.
- This break down below that support line means lower prices to come.
- Also note the RSI experiencing higher lows (RSI divergence) and that pattern gets broken when the stock experiences a heavy sell off on the 11th and 12th of December.
- MACD is unsure at the moment and could turn lower if tomorrow is met with more selling.
I recommend entering C as a short in your real money portfolio if there is further confirmation of selling tomorrow, on good volume, taking the price further below this trend line.
$29.78 (12/27/07)
