Diary of a Financier

Citi Turning Over

In Capital Markets on Fri 4 Mar 2011 at 17:43
  • BAC vocally downgraded C & GS today.
  • C  has turned-over and confirmed a bear trend.
  • C rests at the same price where US Treasury anounced the divestiture of its final shares.
  • Shortable down to 2nd support @ $4.

After Bank of America vocally downgraded Citi (C) and Goldman Sachs (GS) today, both stocks really turned over.  Citi downright confirmed a bear trend:

C daily- upside momentum is waning in divergence to the triple top price action. Further, support has been breached in MACD & MFI, confirming a bearish reversal.

The stock sits on first support, conincidentally, exactly where it was when the Treasury announced the sale of its remaining stake on December 6, 2010.  Now, second support at $4 is my target:

C daily- 2nd support at $4 is the critical threshold separating C from its 2009 pit-of-despair.

The government will have a basket case on its hands if Citi dips under $4.  When a bank goes under, equity just gets wiped out.  End of story.  According to FinViz, Citi sits with LTDER= 2.33 and a P/B= 0.83.  If Citi had to writedown a portion of its assets, you better believe that book value will evaporate, and the mark-to-market reverberation throughout the US would be deafening.  Luckily, banks don’t have to mark-to-market, thanks to April 9, 2009 updates in FAS 157:

Status of FASB Staff

Position FAS 157-4

Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly


…so the burden is really only borne by the FDIC.


  1. Citi still sliding since this entry:
    Shorted @ 4.63 = +5% unrealized gain to date.
    I’d keep the position open still too.


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