PENNANT FORMATION
I'm seeing the same indicator that I saw with MGM a few months ago when the stock jumped 100%. If you look at the daily chart you can see a pennant formation, and we seem to be near the pop. AIG could start going much higher either starting tomorrow or Monday. Note that this formation can only be confirmed once it breaks up, and this should be I believe when the price goes over $27 approximately. According to the technicals, AIG has the potential to move up another $13 once it goes over $27, so I'm giving AIG a price target of $40 in the short term, maybe with 1 to 2 months, but it could also happen within weeks, as it did with MGM. I hope, I'm right in my prediction, as I was with MGM just 2-3 days before it popped, the pennant formation is one of the most accurate formations in technical analysis.
On August 12, I had taken a long position in AIG at $26.15, however my stop loss of -8.00% got triggered 2 days later, as the pennant formation was not yet complete, meaning that I jumped in too early. On August 20th, AIG jumped as high as $35.00, I then re-opened a long position at $33.40, now that the formation had been confirmed, and since I was expecting AIG to go to at least $40.00 before pulling back. Luckily for me, what occurred after was some positive feedback (an over excitement of traders/investors which led the price much higher than its fair value). I managed to sell my position on the 27th in 3 lots for an average of $47-$48. I may have lost some more potential gains, in both positions taken, but I played it safe and I'm happier to just lose potential gains rather than make bigger losses. I made a 40% gain rather than what could have been an over 100% gain, but this would have meant that I would have taken on much more risk, since the pennant formation was not yet confirmed. The reason things played out this way, is because of my trading strategy that I have not shares with you that is based on discipline, where I always have stop losses set to limit my losses to -7.00% to -8.00%. That's why my first position failed. My 2nd position, allowed me to go long without taking too much risk, after seeing the pennant formation confirmed, whereas during the first position the formation could have failed and gone the other way causing me to have bigger losses if I hadn't set stop losses. The big pullback occurring right now with AIG which is today back to $36.00, is simply a negative feedback, meaning a reversion to the mean to its fair value.
DARK CLOUD FORMATION CONFIRMED
I managed to predict AIG's top the next day, August 28th, after seeing a dark cloud formation:
AIG top will be confirmed if t closes down after hitting a higher high today. AIG will start a down trend, if this occurs, which I wouldn't be surprised to see happen, at the latest maybe tomorrow. I had set a price target of $40, but often like this case of AIG, the over excitement and greed of people who missed out on the big move causes the price to move much higher, and cause a positive feedback (amplified move). I believe next week we will have a negative feedback, which means a reversion to the mean. We will see a dark cloud formation with AIG if it closes lower today and Monday. I think the market will start its correction next week, as we the month of September begins. After seeing AIG hit a higher high while closing lower than its previous day's high, a down gap the next day which occurred was required to call the top which I did. Now, why did I not take a short position just like I did with BAC. Simply, because AIG has a high beta and has huge swings on both up and down side. This means that even if I were to put a -8.00% stop loss, there is a good chance that AIG could open up or down 20.00%, and thus incurring a bigger loss than I'm willing to. Some traders may have a higher risk tolerance, and may have shorted AIG, but for now I felt it was too risky.
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