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Citi and one other banking stock could pop into earnings, trader says

Citi looks set to pop heading into earnings, trader says

Financials ring in the beginning of the earnings season next week.

Major banks Citigroup, J.P. Morgan, Wells Fargo, Bank of America and Goldman Sachs are due to release quarterly results over next Monday, Tuesday and Wednesday.

Sarah Potter, author of "How You Can Trade Like a Pro," is placing her bets on two of those.

"Two stocks in that pool that are of particular interest to me would be Citi and J.P. Morgan," Potter told CNBC's "Trading Nation" on Tuesday. "Both of those offer some nice opportunities to the long side⁠ and my expectation is that these stocks will continue to pop after we hear their earnings announcements next week."

Citigroup has far outweighed the rest of the banking stocks, while J.P. Morgan has matched the industry. Citigroup is set to report on Monday, and J.P. Morgan on Tuesday.

"Citi almost looks like a bit of a ladder⁠ — like it's been trying to climb a little bit. If you look at it, about six to seven days ago, it looked like it was a consolidated pattern, and really wasn't able to breakout to the upside. It has since done that, and is now starting to waver again between the $71-$72 area," said Potter.

To play a move higher after earnings, Potter is buying a 75 call with an August expiration. A move to $75 marks 6% upside. It last traded above that level in March 2018.

J.P. Morgan also looks to head higher, said Potter, though she advises a wait-and-see approach until its next move is clearer.

"J.P. Morgan can be its own beast — and it can move a little bit on its own, as opposed to what some of the other players do," said Potter. "I'll probably look to enter J.P. Morgan towards the end of this week after we have a little bit more certainty."

Before Potter jumps in, she advises waiting for a pullback to around $112, a level it traded below as recently as June.

"Look to buy a call at the money. So, I don't want to jump into J.P. Morgan before the moves happen, I want that stock to pull back first, pick it up at the money around $112, and then carry that into August as well," said Potter.

J.P. Morgan has less than 1% to fall to hit Potter's purchase target. It traded at around $113 on Wednesday.

Trade these two banks heading into earnings, expert says