Stock Trading Predictions & Technical Analysis: AIG

Monday, September 21, 2009

AIG - Pennant Formation Confirmation

AIG - BUY

I took a long position today with AIG at $45.85 after seeing a lot of positive and BUY signals from the chart. I caught this breakout after seeing AIG move upwards today over +15.00% being the top performer today from my watch list. AIG being up while the market is down is bullish, and leads me to believe that when the market will go higher, AIG should move even higher again. Exactly one week ago, I posted the chart below indicating that we could soon have a breakout up soon, after seeing a second consecutive pennant formation.

I posted the following chart last Monday, September 14th, in my "Current BUY, SELL, WAIT & HOLD Indicators" post:

Today we have a lot of positive signals. First we got a breakout upwards, confirming our pennant formation. Ideally we would like to see tomorrow another up gap hitting a higher low and higher high, or at least remain around current level of $45.00-$46.00. I currently have a surprising price target, that myself have a hard time to believe, and will only believe it when it happens of $72.00 in the coming weeks, if the formation does indeed gets confirmed and that the share price continues higher. I believe that with the last pennant formation, I had predicted a price target of at least $40.00 (fair price), while AIG continued to rally to $55.00 to what I consider a positive feedback (exaggerated move due to over excitement, and other traders getting in late). We then had a negative feedback (reversion to the mean, fair price) to $40.00 the price target I had set for AIG. With all that being said, if AIG does reach $72.00 it may go even higher before pulling back around this level. However all this is too premature to talk about, and there is no guarantee this will happen, and I will monitor AIG on a daily basis. Keep in mind that AIG is a very volatile stock, with a Beta of 4.08, which means that if you have a -7.00% stop loss order like myself you could get whipsawed. This means that as the price moves higher, AIG may have big down gaps of over your stop loss before continuing higher. However by no means, do I suggest to anyone to not set a stop loss order, and I have my -7.00% stop loss order set. I just want to make sure you understand risk/reward ratio of owning this stock. The critical point in AIG's pennant formation is when it approaches $55.00 (our last top). If or when it goes over $55.00, going to $72.00 may happen sooner than later. The $55.00 level is the only obstacle right now.

We had a lot of other positive and BUY signals today. First the 50 day MA crossed over its 200 day MA today, a positive sign that the price is going higher in the long term. After todays breakout upwards, we also had an increase in volume which is required for the price to move higher. The volume had been decreasing in the past 2 weeks ever since it had topped at $55.00, and this is common of pennant formations. Finally we are about to have another BUY signal from the MACD crossing upwards if the price continues to move higher. Overall AIG looks very bullish.

Long AIG @ $45.85 - Stop Loss @ $42.93

8 comments:

YoelSeptember 22, 2009 at 9:07 AM
Just wanted to point out that AIG is up already 12.00% in pre-market st $54.20.
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DBSeptember 22, 2009 at 10:26 AM
Yoel,

Looks like we definitely have a big reistance at $55, wonder if would cross that obstacle. Please keep us posted if you see a change in trend.

Thanks,
DP
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traderSeptember 22, 2009 at 10:39 AM
now @ 50.59....
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YoelSeptember 22, 2009 at 12:12 PM
This morning I sold a portion of my shares representing my dollar gain at $54.13, then my trailing stop order got triggered and the rest of my shares were sold at $51.03. But I took another look position at $51.58, because I feel confident this will go over $55.00. But there is no way to know for sure, this is just a feeling, and like usual I have set a stop loss order at $48.30.
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YoelSeptember 22, 2009 at 3:26 PM
Now I'm out again at $48.38 with a loss of just under -7.00% loss, this stock is having crazy swings. I think I'll wait until it goes over $55.00 for now, to get back in.
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UnknownSeptember 22, 2009 at 4:14 PM
Hi Yoel, what do you think about ENER? I bought some shares a few days ago($13.80), and I wonder if it is time to assume my losses and let them go.
Thanks
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YoelSeptember 23, 2009 at 12:02 AM
ENER is currently a HOLD. ENER has managed to stay above it 50 day MA at $13.00 for the past few days, which is a very good sign. ENER has strong support at $13.00, and there seems to be the possibility of a flag formation, which could make ENER pop up $3.00 once it goes over $13.75-$14.00 and closes above these levels. If ENER falls and closes below $13.00, this would be a SELL signal, and below $12.25 would be another SELL signal as well.
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UnknownSeptember 23, 2009 at 6:45 AM
Thank you Yoel
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TECHNICAL INDICATORS

BUY SIGNAL: Indicates the possibility of the start of a new up trend or the continuation of the current up trend. This signal may be often given in the early stages of a potential new up trend that was preceded by a down or sideways trend. Such signals do not always succeed and may fail at time.

BUY: Indicates that the current up trend is already in motion and a BUY SIGNAL was already given earlier. A BUY does not necessarily indicate that the stock will continue higher from here, but simply that the stock is trending up. The further into the trend you decide to take a long position, the more risk you have of seeing it reverse back down sooner rather than later.

STRONG BUY SIGNAL: Indicates a stronger, more significant and reliable signal than a BUY SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG BUY: Indicates that the current up trend is already in motion and that STRONG BUY SIGNAL was already given.

SELL SIGNAL: Indicates the possibility of the start of a new down trend or the continuation of the current down trend. This signal may be often given in the early stages of a potential new down trend that was preceded by an up or sideways trend. Such signals do not always succeed and may fail at time.

SELL: Indicates that the current down trend is already in motion and a SELL SIGNAL was already given earlier. A SELL does not necessarily indicate that the stock will continue lower from here, but simply that the stock is trending down. The further into the trend you decide to sell a position, the more risk you have of seeing it reverse back up.

STRONG SELL SIGNAL: Indicates a stronger, more significant and reliable signal than a SELL SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG SELL: Indicates that the current down trend is already in motion and that STRONG SELL SIGNAL was already given.

HOLD: Indicates that traders who already hold this stock, should hold on as long as the trend persists. This signal is usually given during an up trend for which it would be considered too risky to take a long position at this point.

STRONG HOLD: Indicates that the current trend has been in motion for a while and rarely deviated away from the trend. Although the stock may continue higher, there may not be enough potential up side to trigger a BUY SIGNAL. This type of indicator usually means that the stock has very strong support levels which may have been tested but not broken.

WAIT: Usually given during a sideways trend for which we are waiting for a move that would trigger a BUY SIGNAL or SELL SIGNAL. This could also indicate uncertainty and the risk that would be taken if you were to take a long position at the current level. Taking a long position after giving a WAIT indicator is considered a gamble.