Citigroup Inc (C)

[Enterprising Investor]

Is It Time to Buy Citigroup? -- Plus Jim Cramer's Take (5/09/16)

By Gary Morrow

After peaking in late April, Citigroup (C - Get Report) has been steadily drifting lower. At Friday's open, the stock was putting in its seventh straight lower low as it began to test the upper band of a key support zone.

If shares can continue to stabilize in this area, a low-risk entry opportunity will develop for patient bulls.

Before Citigroup ran out of upside momentum on April 27, the stock had surged nearly 20% from its low earlier in the month. This impressive move drove shares to their highest overbought daily moving average convergence/divergence reading since early 2013.

The stock had also entered a very heavy resistance area just below its declining 200-day moving average. This key zone also included the stock's August and October spike lows from last year. With momentum easing, it was becoming clear that Citigroup would need a healthy pullback before the bull run off the February lows could continue.

Citi's two-and-a-half week pullback reached key support on Friday. As a base begins to form, patient Citigroup bulls should keep a close eye on the $43-to-$44.25 area. This key support zone includes the stock's March high near the upper band and the February high at the lower band. Citi investors should consider purchases in this area as low-risk. A close below $42 would signal a deeper pullback and that more drawn-out consolidation is ahead before Citigroup can mount a fresh bull leg.

From a fundamental perspective, Citi is a holding in Jim Cramer's Action Alerts PLUS charitable portfolio. Cramer and Research Director Jack Mohr wrote recently:

We expect Citigroup to outperform its peers in the intermediate term as it benefits from 1) a well-positioned franchise that can withstand uneven global GDP growth, reduced commodity prices and a slower trajectory for U.S. rate increases, while outperforming its peers if the global economy strengthens; 2) the exit from weaker/less profitable businesses and a renewed focus on areas of strength; 3) solid efficiency ratios and a strong focus on cost controls; 4) its asset sensitivity (U.S. rates +100 basis points, net interest income up $1.4 billion, with the majority tied to the short end); 5) Citi "bad bank" holdings continuing to slim down and turning a profit in 2016; and 6) an acceleration of capital redeployment with stress results and a further acceleration in 2017.

http://www.thestreet.com/story/13562711/1/is-it-time-to-buy-citigroup.html