- Stock: AIG (AIG)
- Setup: $29.42 to $31.11 support zone, with timing parameters between Nov. 19 and Nov. 22
- Potential target area: $39.48 (if a new low is made, the target will be adjusted)
- Risk: Defined below the $29 area
Although I've been out of school for a long time, I still have homework to do almost every night: Doing my technical work in advance prepares me for some of the best opportunities in the markets. My setups don't always play out, but when they do, the risk is relatively low compared to the potential reward.
With that in mind, let's look at the setup I am currently stalking in AIG. We are currently looking at both time and price parameters that suggest the stock should be watched for buy signals between now and early next week.
My case is as follows. The current decline in AIG -- which has amounted to $6.67 as of Tuesday's close -- is similar to prior pullbacks of $6.56, $7.20 and $7.87, as illustrated on the daily chart below. Part of the support cluster I'm looking at, $29.42 to $31.11, comes from the 100% projections of these prior declines from the most recent high in October. It also includes some other key price relationships, such as retracements and extensions of prior swings.
Let's look at timing next. Now, this might not match up with a test of the above price support, but let's look at it just in case it does. When timing parameters match up with price parameters, these tend to make for the highest-probability trade setups.
If you are not familiar with how I use Fibonacci timing, know that when a clustering of time cycles come due, you want to watch for a possible reversal of whatever the market is doing into the time "window" plus or minus a day of the cycles. For example, since AIG is trading lower into this next window, the timing would support a possible reversal back to the upside.
Now that we have a setup to stalk, personally I have to recommend that you wait for a trigger to fire off that suggests it is worth placing a bet against these key price and/or time parameters.
For more information about trades and triggers, please refer here.