Tomahawk, WI 9/04/2013 (BasicsMedia) –  Citigroup Inc (NYSE:C) (Closed: $49.37, Up: 2.15%) opened with a gap up and stayed there for the rest of the session. It closed above the previous 3 days’ high for the first time in last 6 weeks. A spike low in the opening moments made the candle a Doji, but it should be taken as an absolutely bullish day. The volume at 29 million was just a bit higher than the average volume of 27 million, not showing any strong interest in the stock right now.

The stock is one of the most affected stocks in the bear market of 2007 – 2009 and was on the verge of getting obliterated. In the Nineties, it was among the superstars with no limits. It rose to an astounding high of $591 in 2000 from its nearly insignificant 1990 bottom of $14. The party came to a halt in 2000 – 2002, when it lost about 50% of its value to touch $245 in 2002. But the next bull market returned it to its former glory and it went to $570 levels once again by the end of 2006. In the next 2 years, it lost all of the gains of 20 years and made a bottom at $9.70 in 2009.

From the 2009 bottom, the stock is moving in a range between $54 – $55 and $21 -$25. Currently the stock is facing resistance from this supply zone. The latest rally from the 2011 bottom of $21.40 to the 2013 high of $53.56 is clearly subdivided into 3 legs till now and the legs are related by the Golden Ratio or 1.618. We could take the rally as a corrective one as we can see two rallies of equal magnitude, 14 points each, inside the move. The last rally might be creating a Triangle. In that case, the current bounce should be the last one before a major fall.

The investors could exit the stock on a break of $47.60 or on a bounce if it fails to clear $54.50 on the upside. In the short term, a bounce is expected towards $50.33 or $51 levels.

Vale SA (ADR) (NYSE:VALE) – Targets $17 & $20 Above Which Long Term Reversal Possible

Vale SA (ADR) (NYSE:VALE) (Closed: $15.24, Up: 5.76%) opened strong on Tuesday and went from strength to strength during the rest of the session. The opening gap remained unfilled, a sign of bullish strength. A further sign of bullishness was evident from the volume which at 28 million was way higher than the average volume of 19 million. The price action created a bullish Marubozu, the most bullish single candle pattern.

The long term trend of the stock is down for a long time now.  It made its debut in the aftermath of the IT bubble burst in 2003 and soon participated in the next bull market. It was one of the late toppers and made its top at $44 levels in 2008 rallying from its 2003 bottom of $2 levels. It lost more than 80% of its value in the crash of 2008 and bottomed out at $8.80 in the same year. The next bear rally took it very close to its earlier top but faced selling at 437.25 levels. The drop from there is gradually tracing a Falling Wedge, implying a decrease in the bearish momentum.

In the drop from the 2011 top, we can see all count trend rallies are very similar in magnitude, about 6 – 7 points. So a reversal or a bigger bounce at least, would be signalled by a rally bigger than 6 points. That gives us the $18.50 – $19.50 as the zone to watch. Interestingly, the drop is also contained in two other channels seen on the weekly charts.

In the daily charts, we can see a bullish cup & Handle pattern, which would be broken above $15.50 – $15.90, giving us targets of $17 and $19.70. But the weekly channels mentioned above would provide resistance at $18 & $20 levels. This confluence gives a great significance to the zone of $18 – $20, above which a much larger reversal would be triggered.

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