It’s been a while since we’ve looked in on this erstwhile basket case, but I must admit to being ever so slightly impressed — not only with the fact that its ABCD rally from the November abyss has exceeded an 8.97 target by three cents, but because it created a fresh impulse leg on the hourly chart in the process. Even so. it’s still all uphill from here, and no matter how bailed out Citi becomes, the burden of proof will continue to rest with the bulls. The stock is capable of 11.77 if the short-squeeze conditions can be made to persist, but we’ll want to see a two-day close above that Hidden Pivot’s midpoint, 9.06, before we infer that the hoax of Citi’s resurrection is sustainable.

We’re offering a December 90 call short for 1.80 against a January 90 call acquired earlier for 2.34. For no fewer than four reasons, I’ve resisted the urge to exit the position on the fleeting spikes that have occurred in each of the last two days. First, I did not want to burden you with the tiresome and unreasonable task of having to trade nervously; second, because the rally target at 88.21 looked sufficiently compelling to deserve the bullish benefit of the doubt; third, because I really am eager to pay your subscription costs with this trade; and fourth, because all the correction bulls out there, including some technicians I respect, have got me just a little bit spooked. However, doubts are mounting as IBM continues to screw the pooch, and if I had followed my own discipline of keeping risk:reward in a 1:3 relationship, we’d have exited the position no worse than 85.10 on a trailing stop as IBM came down from its recent high at 85.88. (For a more detailed discussion of how this works, see “Dynamic Trailing Stop” by selecting ‘edu’ in the “All Picks By Stock” field near the top of this page.) In any event, let’s raise the stop on the January 90 call to 2.20, making it one-cancels-the-other (OCO) with our closing offer for the January 90 call. If the option trades at that price, sell it at-the-market. _______ UPDATE: We exited at the worst price of the day so far, 2.00, realizing a $34 trading loss. Please note: To have avoided getting ripped off by the market makers this morning I would need to have given you a rather elaborate set of instructions. When trading options, always keep in mind that the opening rotation in particular is rigged and dominated by guys that I, a former market maker, would not trust alone with my pet lizard.

The 969.25 rally target is get a bit mouldy, but it will remain valid nonetheless unless 813.00 is exceeded to the downside. The midpoint resistance (now support) with which it is associated lies at 891.25, and so we shouldn’t be surprised to see the futures pussyfoot near there in the hours (days? weeks?) ahead. The resistance should have been no more than a mild stumbling block, but the fact that it has put up a fight about to stretch into its fourth day is yet more evidence that there is insufficient buying power to short-squeeze stocks into a 3-5 week rally as some of my guru colleagues evidently expect.