Citigroup buy or not buy? Technical Analysis on Citigroup? (PART 2)

I posted an article about some technical analysis I applied on Citigroup stock a few weeks back (http://ilearn2invest.blogspot.com/2009/12/citigroup-buy-or-not-buy-technical.html). Citigroup share price dropped significantly due to the TARP repayment announcement. Below was the summary i put in one of my comment before.

Citigroup Inc. announced the pricing of 5.4 billion common shares and 35 million tangible equity units as part of agreement with the U.S. government and its regulators to repay U.S. taxpayers for $20 billion government holds in TARP trust preferred securities and to terminate loss-sharing agreement with the government. The common stock priced at $3.15 per share, generating net proceeds of approximately $17 billion. Tangible equity units priced at $100 each, generating net proceeds of approximately $3.5 billion (about $2.8 billion counted as equity.) Upon completion of the offerings and the repayment of the $20 billion of the TARP trust preferred securities and the termination of the loss-sharing agreement, Citi will no longer be deemed to be recipient of exceptional financial assistance under TARP. The U.S. Treasury (UST) announced it would extend its lock-up period on the sale of its 7.7 billion share common equity stake to 90 days from 45 days after the completion of this offering. The tangible equity units are comprised of prepaid stock purchase contract and junior subordinated amortizing note. Each stock purchase contract has settlement date of December 15, 2012 and will settle for between 25.3968 and 31.7460 shares of Citi common stock, The amortizing notes will pay holders equal quarterly installments of $1.875 per amortizing note, which in the aggregate will be equivalent to 7.50% cash payment per year with respect to each $100 stated amount of tangible equity units.


From the last technical analysis on Citigroup, the result showed it was trending down (12/14/2009) and no up trend signals. The summary was to keep waiting for a few more days. Let us review on the stock price base on technical analysis today (12/31/2009).

Citigroup - 3 months

There was some up trend in the signal on 12/31/2009. Current support level was ~USD3.2; resistance was ~USD3.44 for the past 2 weeks. Could it be any consolidation before a breakout trend? Dear investor, are you in or out?

Citigroup buy or not buy? Technical Analysis on Citigroup?

In one of my regular coffee session, one of the investor brought this topic up. He told me he plan to buy some of the banking stock. He is looking at BAC, WFC and C.

"BAC and C are quite exciting. But if you are a trader, C give you wider price range swing and probably could use some technical to help you up.", I told him.

"That is what I think so.", he said.

The investor sent me below article this morning. One of the investor (Cramer) talk about 6 reasons to buy citigroup (from source: http://www.cnbc.com/id/34419773/):

1. Wells Fargo, as a result of buying Wachovia, has too much mortgage exposure. More mortgages mean more potential foreclosures, and that will hurt earnings. Citigroup shouldn't have that problem.
2. Citigroup does more business overseas, where its reputation is much more intact. Cramer said the international footprint would make Citi a great call on worldwide trade expansion.
3. The government's 34% stake, totaling 6 billion shares, in Citigroup is not an issue, especially when the average daily trading volume is in the hundreds of millions of shares. Whether Washington slowly sells its position or holds on for a higher price, Cramer called it a non-issue.
4. Citi has already dropped significantly ahead of the offering, Cramer said, much more than it deserves. That gives investors a great, great entry point.
5. The share price is just $3.70, a near lottery-ticket price with somewhat similar potential. While the dollar amount doesn't matter, Cramer does bless this as a single-digit speculation play, the kind that investors seem to love so much.
6. Cramer thinks Citigroup could triple in price over the next three years. As the company cleans up his balance sheet, the resultant profits will restore its book value. And banks trade as a function of book value. So the refrain going forward is, "$12 by the end of 2012."

I still remember not long time ago, the CEO requested approval from investor to increase common stock. Most of the investor do not like it, it might further dilute the stock.  Below are the summaries of the change in one of the CEO letter (http://www.citigroup.com/citi/fin/data/ceoletter090910.pdf):

• Increased the number of authorized shares of common stock from 15 billion to 60 billion;
• Eliminated the voting rights of the holders of common stock on any amendment(s) to the restated certificate that relates solely to the terms of any series of preferred stock so long as such series of preferred stock is entitled to vote on the amendment(s); and
• authorized (but do not require) the Board of Directors to effect a reverse stock split, at any time prior to June 30, 2010, at one of seven reverse split ratios as determined by the Board of Directors.

Frankly speaking, I do know how to use fundamental approach to value Citigroup. Please let me know if you know how to do that ;) But to make our life more exciting, below is some of the technical analysis I used for Citigroup. From the analysis graph (3months or 6 months data), it showed that Citigroup is trending down on 12/14/2009. There is no up trend signal yet. Base on technical, we probably need to wait couple days more for up trend signal.

Citigroup - 3 months

Citigroup - 6 months

Growth Potential of Australia Market??

Public Mutual Bhd is launching a new fund, Public Australia Equity Fund (PAUEF) on 8 September 2009 to tap into the growth potential of the Australian Market. Its chief executive officer Yeoh Kim Hong said PAUEF would give investors the opportunity to capitalise on the long-term growth potential of the Australian market, given the country's strong position in natural resources and its diversified services sector.

The fund will mainly focus on sectors such as the natural resources, banking, real estate and consumer sectors. Please refer the url for more detail.

http://www.publicmutual.com.my/page.aspx?name=prs_rls_090907_1600

http://www.theedgemalaysia.com/business-news/148822-public-mutual-launches-new-fund-to-capitalise-on-australian-market.html

As usual, this new fund brought up some discussion among my friends at our kopitiam session ;)

Some said "well, it's potential"

Some said "i would rather invest in China Market"

Some said "how about the predicted performance?"

Some said "i am not interested in mutual fund. i am an equity guy."

Whatever category you are, let review some data. I have compiled some of market movment of Equity Indexes that included US (DJI), Australia (S&P/ASX200), Hong Kong (HSI), Singapore (STI) and Malaysia (KLSE). I hope this data could help you up ;)

DJI

-32.2% from it's peak

+46.7% since march 2009

S&P/ASX200

-32.7% from it's peak

+46.1% since march 2009

HSI

-33.1% from it's peak

+86.5% since march 2009

STI

-30% from it's peak

+84% since march 2009

KLSE

-20.3% from it's peak

+44.1% since march 2009

Despite of the rebound since march 2009, most of the equtiy market is still underperform. Which market is more attractive to you? Another risk factor to think about it when investing oversea - currency exchange. I have compiled some of the past currency exchange data for AUD, CNY, HKD, SGD and MYR. In long term, which of the following currency will appreciate?

AUD - potential to appreciate vs the peak

CNY - potential to appreciate

HKD

SGD - potential to appreciate vs the peak

MYR - potential to appreciate vs the peak