×

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.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

Read more

Connect