Sometimes a stock can be so deeply discounted for so long that you almost forget where it has been. American International Group Inc (NYSE:AIG) is one of those stocks. Just this weekend the chart of the stock price looked like it might be ready for a break higher. This lead to a series of short term trading ideas for my subscribers should it trigger. Below is the chart I used. Notice that on a Measured Move basis a break out of the current consolidation higher would target 61 or almost 10% higher. Not a bad return against little risk.
But I said this is one that has been depressed for so long it is being viewed on the wrong scale. Step back to the monthly chart below and suddenly your eyes pop open and you audibly saw wow. The whole of the price action from late 2008 until now has been nothing but a basing period. A 6 year base. And the momentum indicator is just starting to get bullish. Those Measured Move arrow from the daily chart above suddenly have very little meaning. In fact this chart shows that is the move higher continues over 63 then there is no real resistance higher until that last big red candle in September 2008.
And virtually no price history above it. Even a mere 23.6% retracement of down leg, hardly a bullish bounce, could go as high as 345, and the typical expectation of 38.2% would mean 557. Makes $6 over the next few weeks look like picking up nickels in front of a steam roller.
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