AIG is a stock that can make you a lot of money as quickly as it can make you lose a lot, and that is why I try to stay away from it. Nonetheless, this is probably one of the best performing stocks of the last month where it moved more than +45% in one month from $42 to as high as $62 just a couple days ago. AIG has been trading in a sideways trend since September 2009, until early last month when AIG made a strong move up to close at $48. Despite seeing this STRONG BUY signal since, I did not want to take the risk of going long AIG because of its extremely high volatility and Beta of 3.75. Today, I was tempted again to go long AIG after getting another STRONG BUY SIGNAL where a typical triangle pattern was broken up with AIG closing with gains of over 7% along with the Stochastic giving us a buy signal also. The STRONG BUY SIGNAL will be confirmed if AIG manages to continue higher and hit a new high above $62.
The long term trend is also looking very promising despite being still young, with AIG above major resistance levels and having the path clear to make a move near $180. Keep in mind that despite AIG's number looking very appealing with a potential to triple in value, the 3 year long term trend is still down and will remain so until the 200 day MA will be broken back up again. I may eventually fall to temptation and go long AIG, but at this time I personally do not want to because of its extreme volatility. AIG is what I consider a gambling stock, because despite being in an up trend you could see major pullbacks and find yourself in major losses despite its trend. I feel very bullish towards AIG, but prefer to remain cautious and not let greed take over. I could have taken a gamble when AIG was trading around $46, but after a quick move towards $62, I will stay away for now as I consider this to be a much bigger gamble and riskier move after such a quick move up. Some of you may be more willing to take higher risk, but you been warned of its high risks.
Yoel,
ReplyDeleteThanks for sharing your views on AIG and DOW.
I noticed that you hold a long position on MON, I have been tracking this stock for some time now. I have a very small position at $50, would you share some of your analysis on it.
Also, I heard about buy and hold strategy for long term like 3-5 years. What would be your take on it?
Thanks,
MON is looking promising with today's earnings report that helped it move above minor resistance. I personally took my long position a couple weeks ago around $64. MON has broken up over its 50 and 200 day MA, while staying above the 20 day MA since the beginning of December giving it a lot of support. The long term weekly trend shows that MON has the potential to reach $78 before it meets critical resistance at its weekly 200 day MA. MON's next resistance level would then be around $85. If these major resistance levels were broken this would trigger a STRONG BUY SIGNAL. As long as MON stays above the 20 day MA I like this stock and will continue to ride the trend. But I follow a disciplined strategy where I don't let any of my stocks fluctuate more than -8% before cashing in my gains. My investment horizon for most stocks is up to a couple months if the trend persists. Basically as long as any stock continues moving up without too much volatility (less than -8%) fluctuation I would hold on. I personally am not a fan of Buy & Hold especially for 3-5 years. I wish I would be able to hold a stock for this long, but this would only mean that the stock kept crawling up for this long without too many fluctuations, which is not that realistic. Basically, I don't decide what is my investment horizon, the stock's performance does. I always make sure to set stop losses to protect any gains I might have. You have to find a balance between determining how much of your gains you are willing to sacrifice to potentially earn more, while knowing where to set stop losses without getting whipsawed. Myself, personally am a Swing-Trader which means that I ride short term trends as long as they persist, but will not hesitate to get out when the trend is broken. If I make the right choices, riding a short term trend could turn into a long term trend. Keep in mind that as long as you don't sell your stock you don't make any realized gains. Imagine holding a stock for 5 years to finally sell at a loss. You will have lost a lot of time, where you could have made better use of your capital.
ReplyDeleteWith a position at around $50, you find yourself in a nice situation. Basically you have to decide and calculate how much of your current gains would you be willing to sacrifice to potentially earn more by continuing to hold the stock. With a gain of nearly 50%, would you be willing to lose -8%, -10%, -15% before cashing in your gains? This is something to think about and should be pre-determined. Myself personally, am not willing to sacrifice more than -8%. However, when you do get into heavier gains, you can afford to be more flexible and set this higher. Basically at this point, I would probably set stop losses below major support levels. In the end you have to know in and advance and pre-determine your exit points. You never want to decide in the moment, because that's usually when you do mistakes.