AIG started moving higher in July last year. It consolidated from August through October before a second move up. That peaked in December and began to roll lower in February. The pullback found support in April and has made a higher high and then a higher low since then. Friday it made another higher high as it hit resistance.
In the broad view, this is building an AB=CD pattern that gives a target to 77.50 on a break higher. The Bollinger Bands® have squeezed in and are now opening for a move higher. The RSI is bullish and rising as it makes a new high. The MACD is crossed up, positive and rising as well. There is resistance at 63.70 and 64.85 then a gap to fill to 66.50 and 67.25. A push over 75 then sees no real resistance to the gap over 200.
The company is expected to report earnings next on August 2. The stock trades ex-dividend June 12, with a 32 cent distribution paid later that month. Short interest is low at 2.1%. The weekly options show all of the open interest sitting below the current price, with the biggest on the put side at 60.50.
Open Interest
Moving out to the June monthly options, the open interest is still focused below the current price but biggest at 62.5, tighter. There is also a big slug of open interest at the 65 strike above. In July the favorite is the 62.50 strike but the call side has an upward focus at 65 and 67.5 as well. August options, the first covering the next earnings report, have equal open interest at 62.5 and 65 on the call side, but it is biggest lower at 55 on the put side.
Looking further, in November it starts to edge up with 65 the biggest open interest. And January 2018 has the biggest open interest at the 45 strike on the call side, with a range from 45 to 60 on the put side.
4 Trades
- Trade Idea 1: Buy the stock on a move over 64 with a stop at 60.50.
- Trade Idea 2: Buy the stock on a move over 64 and add a June 62.5 Put (50 cents) for protection, selling an August 67.5 Covered Call (59 cents) to fund the cost.
- Trade Idea 3: Buy the June/January 2018 65 Call Calendar ($2.93). As the June options expire look to sell Out-of-the-Money (OTM) July options and continue this tactic until January 2018.
- Trade Idea 4: Buy the August 60/65 bull Risk Reversal (55 cents) and sell the July 7 Expiry 65 Calls (48 cents) to fund it and add leverage.
Elsewhere
Elsewhere look for gold to consolidate with a bias higher while Crude Oil consolidates with a bias lower. The US Dollar Index is in a downtrend while US Treasuries consolidate with a bias higher. The Shanghai Composite has stalled the retrenchment and is consolidating while the Emerging Markets continue to move higher.
Volatility looks to remain at abnormally low levels keeping the bias higher for the equity index ETF’s SPY (NYSE:SPY), IWM and QQQ. The SPY and QQQ are showing strength on both the daily and weekly timeframes while the small cap IWM is already running out of gas. Use this information as you prepare for the coming week and trade ’em well.