Wednesday, April 14, 2010

Shoulda, Coulda: Citi, Again!

It's bad enough having missed one big opportunity in PALM. I have another one, my old favorite Citigroup (C).

I sold the shares at $4.25-ish average long time ago, and since then I was just watching, until about a month ago when I put the proceeds from selling XLF calls into C's calls. XLF March $15 calls unexpectedly went into money, and at that time C was trading between $4.20 and $4.40. I bought April $5 calls at 5 cents a piece.

Then the option went nowhere, as C lost momentum. Beginning of April, as the Op-Ex day was 2 weeks away, the option became basically worthless, a penny. No way in hell that C could go anywhere near the strike price. I left them for dead. (sound familiar?)

Then I happened to take a look at it two days ago after C made it above $4.60. The option was still 1 cents. PALM was still heavy on my mind, but C? How could this go any higher with no news? Nonetheless I called up the screen, and flirted with the idea of buying 1000 calls at 1 cents. It would cost $1000 to buy them. And probably I would lose it all when they expire on April 17.

So I didn't buy. (sounding more and more familiar.)

Then, JPM (J.P.Morgan Chase) struck this morning. (It was my carelessness - I thought major banks report next week and didn't check the exact dates.) And C went flying. 1-cent call option ended at 7 cents. After-hours trading shows C at $5.01.

Here's what C's chart look like. It is a 6-month daily chart, and since February's turnaround it is full of gaps that are not filled. When it gaps up, C seems to gap up over several days.

Today's jump was with solid volume (over 1 billion shares changed hands). Short-term (since beginning of April), there is no divergence in technical indicators. MACD histogram's negative divergence in March resulted in choppy trade but not in complete reversal.

Normally you would think it should correct right here, after a jump like C has had since April 1st, particularly after today. But traders were buying C's April $5 calls (volume was 392,352) all day today. What do I know at this point? Some drunken soul on Yahoo message board for C was calling for over $6 on Friday, $8 on Monday when Citi reports its earnings.

52-week high was last August, at $5.43.

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