In mid-November, I outlined a trade setup in AIG (AIG). The stock had started to look interesting, given its test of some key price support parameters within a larger uptrend pattern, as well as some timing considerations -- and ultimately this setup played out well. While this isn't always the case, I am certainly happy when I'm able to help identify a nice play for readers. So do take another look at that piece -- there is a method to my madness!
In any case, I want to revisit this setup. Even though this stock has already enjoyed a nice rally, it may not have met upside targets just yet -- so I am looking at this current symmetrical pullback as another opportunity for a buy entry.
It might even be a higher-probability trade now, because all the daily moving averages I like to use are in the right place. AIG is above both its 200-day and its 50-day simple moving averages, and the five-bar exponential moving average is still clearly above the 13-day EMA. This supports our bullish bias.
First let's look at the upside targets for a continued rally off the Nov. 14 low. The 1.272 Fibonacci extension target comes in at $39.58. The second target, or 1.618 extension, comes in at $42.01. Target 3 is the 2.618 extension, which comes in at $49.04.
Now, AIG is currently testing a pullback support level between $34.45 and $35.26. I would be a buyer of the stock as long as the price continued to hold above that area, and I'd look to keep it at least until it reaches the first bigger-picture target at $39.58.
I will consider myself wrong the trade if the stock takes out the Dec. 21 swing low at $34.34.
For more information on trades and triggers, please refer here.
