Yet another look at Citi

With the stock tantalizingly below $9, many people have expressed an interest to see if there is any change in the outlook. So here is a fresh chart which suggests that perhaps we might find some support around $7.20. An ideal way to trade this will be to wait for a bottom to be in place, and see it confirmed by observing how a correction after a first rebound behaves. For example, suppose Citi touches $7.40 and starts climbing, and suppose further that it reaches $9.50 and then starts easing. We should first see whether it comes down on low volume, but does not violate the prior low of $7.40.We should then join in the buying when we see it move up rapidly on increasing volume. This approach, as I said, is an ideal way to invest. However, being traders, most of us wish to identify the bottom, and try to buy as close as possible to that level. We tend to think that we will be controlling our risk this way because we can then exit at a small loss if the trade goes wrong. Unfortunately, it requires a lot of courage and discipline to get out at a loss. I have learnt the lesson the hard way, and was able to sell off my previous purchase of Citi at a small loss (refer previous posts). So, if you are willing to be strict about stops, then there is no harm bottom-fishing. But do keep your positions small. You can then add as we go higher, and still feel the elation of having invested at least a little bit near the very bottom! (I know that great feeling )