Trader says it’s time to bank on Citi shares

Citigroup has just broken out of its resistance, says one trader making a bet that it will head higher.

Todd Gordon, founder of TradingAnalysis.com, said Monday that Citigroup is worth taking a look at, as "we're seeing the financials do quite well."

Citigroup held a level of last support at the $37.66 mark and is now beginning to "press higher," Gordon said on CNBC's "Trading Nation."

Looking at a chart of Citigroup going back about one year, Gordon pointed out a "downtrend resistance" trend he says will prompt sentiment to change within the stock.

This will lead to "buy-stop losses to go off. All of a sudden you're getting momentum players involved," and the fundamentals will have improved, Gordon said.


"It looks like we have a pretty good upside move coming here. If we could get those bond markets to move lower, bond yields to break higher, that's a nice push," said Gordon.

To try to profit on the now-$46.50 stock's next move, Gordon recommends buying a call spread. This is a bullish options trade in which one call is bought, then a higher-strike call is sold in order to cut costs. In this case, Gordon is buying the September 45-strike call and selling the September 50-strike call, for a total cost of $1.87 per share.

That $1.87 is the most that Gordon can lose. If Citi closes at or above $50 on Sept. 16, Gordon will enjoy a profit of $3.13 on the trade; breakeven will come at the sum of the lower call's strike price and the trade cost, or $46.87.

From a tactical perspective, Gordon advises that once Citi falls below $45, those in the trade should "hit the eject button, get out," in order to recoup as much money as possible.

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more

Connect