Stock Trading Predictions & Technical Analysis: AIG - Potential Inside Up Bottom Formation

Tuesday, December 1, 2009

AIG - Potential Inside Up Bottom Formation

AIG - WAIT

AIG has been in a major down trend since the end of the month of September and have since fallen from $52.50 to as low as $28.00. After a big fall yesterday, AIG strongly bounced back up strongly today at its 200 day MA, despite closing slightly below it yesterday. This is a bullish sign. If AIG were to trade below the 200 day MA today, AIG could have very likely continue to fall down even harder. Another bullish sign today, is the fact that the stochastic which is in very oversold territory has finally given us a BUY SIGNAL, the last one being at the end of October after AIG temporarily made a big move back up from $32.50 to $40.00 in a couple days, despite continuing to trade down along its down trending channel line. With today's strong move up, there is now the potential to see an inside up bottom formation tomorrow if AIG manages to have another strong day up by hitting a higher low and higher high, while closing higher than yesterday above $32.50.

Here is what a three inside up formation looks like:

This pattern occurs at the end of a declining trend. The three inside up formation, once it occurs is ranked as one of the best reversal patterns, in terms of success rate with a high percentage of winning trades.

Today, I took a long position with AIG. I usually strongly advise not to buy a stock in a major down trend, however today's move along with the market now looking to move higher again made me take this decision. AIG has given us several bullish signal today: 1) it bounced back up strongly over its 200 day MA, 2) the stochastic gave us a BUY SIGNAL. Also despite the down trend not being broken yet, if we get a confirmation of the inside up bottom formation tomorrow it may be too risky to get in since there is not enough support that may be close to tomorrow's prices if it does indeed move higher. I decided to go long AIG today, because this was an opportunity to get in close to the 200 day MA where it has strong support whiile it bounced back up strongly over it today. Even if AIG could still continue to trend down along its current channel line, I see the potential for AIG to go towards $35.00 first before a pull back may occur. Basically, even though AIG may continue to trend lower in the very short term I see the potential for a decent return. If AIG does move higher and fails to go over $35.00 I will most likely sell my position then. Remember that AIG is a very volatile stock, and is always considered a high risk stock, and that is why I invested less money into it for my entry as I usually do. If AIG breaks sharply over $35.00 and $40.00 I likely add to my position as AIG will have broken its down trend and over its 50 day MA, giving us a BUY & STRONG BUY SIGNAL. With all that being said, I did set as usual a Stop Loss order below the 200 day MA. If it does get trigerred I will take on a loss as high as -7% but with less money invested as usual, in terms of dollar this would be a smaller loss.

AIG - LONG

1 comment:

DBDecember 10, 2009 at 7:42 PM
Yoel,

AIG seems to be heading down, do you have any updated analysis on it?

Appreciate all the info you share,
DP
ReplyDelete
Replies

Add comment

DISCLAIMER

The analysis and information given on this site is for information purposes only. Trading in these strategies may result in capital loss. Individuals should do their own independent research or consult an investment advisor before taking investment action. All materials on this site, including the stock picks, are for news and entertainment purposes only and are provided on an "as is" basis and without warranties of any kind, either express or implied.

Under no circumstances will yoel stockpredictions.blogspot.com be liable for any special or consequential damages that result from the use of, or the inability to use, the materials in this site, even if advised of the possibility of such damages including, but not limited to, negligence. In no event shall yoel-stockpredictions.blogspot.com have liability to you for any damages, and losses for accessing this site or using the information provided.Yoel-stockpredictions.blogspot.com does not guarantee that the information contained herein or distributed from this site will be uninterrupted or error-free, that defects will be corrected. Past Results are not necessarily indicative of future performance.

Yoel-stockpredictions.blogspot.com does not trade against you. Some sites are using the size of their visitors to 'move the market' and take advantage personally with their stock picks. This is illegal, and mostly applicable in smaller less liquid securities, which are not covered on this site. It is highly unlikely that the articles in this site about stock picks could ever move the market.

As a visitor to this site, you acknowledge and agree that any reliance on or use by you of any information available on this site shall be entirely at your own risk. In no event shall yoel-stockpredictions.blogspot.com be liable for any direct, indirect, consequential or exemplary damages arising from the use or the performance of this site, even if will yoel-stockpredictions.blogspot.com has advised of the possibility of such damages. Trading may not be suitable for all visitors of this site or the information provided by this service. The visitors assume the entire cost and risk of any trading they choose to undertake.

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.