Citi Trend Follower

Citi offers opportunities driven by restructuring and re-rating themes - capital return, divestitures, and the closing of its historical discount to tangible book value. While premium banks like JPMorgan may be more consistent, Citi can produce powerful extended trends when its turnaround plays out. It is also highly liquid with an active options market.

Use the 20 EMA for short-term trend and entries, the 50 EMA for intermediate trend confirmation, and the 200 EMA for major trend direction. The 20 EMA is most important for entry timing - enter on pullbacks to a rising 20 EMA in confirmed uptrends.

An uptrend is confirmed when: price makes higher highs and higher lows, price is above a rising 20 EMA and 50 EMA, MAs are properly aligned (20 > 50 > 200), and ADX is above 25. All conditions should be present for a high-confidence trend.

A trailing stop moves in your favor as price moves favorably, locking in profits while allowing the trend to continue. It removes emotion from exit decisions and ensures you capture the majority of a trend while protecting gains.

For share trading, $10,000-50,000 is comfortable for meaningful positions, though there is no minimum since shares trade individually. A single options contract controls 100 shares and costs only the premium (often a few hundred dollars). Note the Pattern Day Trader rule requires $25,000 equity for frequent intraday trading in a margin account.

Trade Citi longs only when the KBW Bank Index (BKX, tradeable via KBWB) is in an uptrend (above rising MAs, higher lows). Citi correlates 0.85-0.92 with this index. The strongest Citi trends occur when the sector supports the direction. Avoid Citi longs when the bank index is breaking down.

Pullback entry waits for price to retrace to support (20 EMA) in a confirmed uptrend - offers a better price but may not trigger. Breakout entry buys above a recent swing high - confirms momentum but at a higher price. Pullback entry typically offers better risk-reward.

Expect 3-5% pullbacks in strong trends. Check: Is volume low (healthy)? Is price holding key support (20 EMA, swing low)? If yes, hold the position. Review your stop level, not price. Pullbacks to the 20 EMA are opportunities to add, not exit.

Calculate: Position Size = Risk Amount / Stop Distance. Risk 1-2% of capital per trade. Also limit the position to 10% of portfolio value. Example: $100k capital, 2% risk = $2,000. Stop $6 away. Position = 333 shares (but check against the 10% portfolio limit).

Primary exit: When the trailing stop (below swing lows) is hit. Secondary: Close below the 20 EMA. Confirmation: ADX falling below 20. Don't exit on emotion or minor pullbacks. Let the system work - trend following accepts giving back some profit from the highs.

Use ADX and MA analysis. ADX > 25 with MAs spreading = trending regime (full activity). ADX < 20 with MAs converging = ranging regime (reduce activity). Also monitor ATR - expanding volatility supports trends. Citi trends best during restructuring and re-rating phases.

Score factors: Trend direction (3 pts: price > 20 EMA, 20 > 50 EMA, 50 > 200 EMA), Strength (2 pts: ADX > 25, ADX rising), Pullback quality (2 pts: near 20 EMA, RSI 40-60), Sector (2 pts: KBW Bank Index uptrend, Citi outperforming). Enter at 6+/9. Every factor is a transparent, auditable threshold - no black-box prediction.

For trend following, use ITM or ATM calls with 1-3 month expiry. This provides leverage with reasonable theta decay; LEAPS suit longer multi-month plays. Bull call spreads reduce cost but cap upside. Roll positions before expiry to maintain exposure. ITM options have higher delta for better trend tracking.

Single stock (Citi): Maximum 10% of portfolio. Money-center banks: Maximum 15%. Total financials exposure: Maximum 30%. Total portfolio heat (all position risks): Maximum 15%. These limits ensure survival even if the bank sector reverses sharply.

Document: Weekly trend direction, daily entry rules (20 EMA pullback + 6/9 score), position sizing (1-2% risk), exit rules (trail below swing lows), risk limits. Journal every trade. Review weekly. Track win rate (target 45%+) and profit factor (target 1.5+). Backtest changes before implementing.