C - How will it perform after the Reverse Stock Split

Fellow traders had been asking me about my thoughts on C after the 10-1 reverse stock split on 6th May 2011.

The facts:

• The reverse split will effectively reduce the pool of outstanding shares from 29.1 B to 2.91 B. 
• The stock should trade in the $45.50 neighborhood, rather than the current $4.55 level.

The Good:

• Most large funds can only buy stocks above a certain price level, certainly not below $5. As such, large funds are expected to buy C in the future. 

The Bad:

• The volume for C from small traders are expected to drop (though may be somewhat compensated by the volume from large funds).
• Based on the experience faced by AIG (it conducted a 20-1 reverse stock split on 1 July 2009), we can expect C price level to drop over the next few days after the split. The stock would then recover with the general market. While the general market dropped for a few days after 1 July 2009 (SPY drop range was just 6.7% off the previous High), AIG dropped by a far more significant percentage

The future:

• I am still bullish about C in the long run. However, I would only pick-up the stocks after the reverse stock split as I expect the stock to drop significantly before it mirror the general market somewhat. I have sold those C shares that I had. 
• Currently, C is at an interesting 38.2% Fibonacci retracement level. 
• A good level to pick up the stocks is near the $36.30 price level (after the reverse split) or even lower. 

Cheers!

PersianCat (Meow !!!!!)