A while back, we had a time/price buy setup in American International Group (AIG). This was described on April 22.
Now that we have already met three targets off the low that was made on April 18, do we hold 'em, or do we fold 'em? I'm going to give you some technical parameters that will help you make this decision. I have done analysis on this one on both the daily and the weekly chart. First, let's look at where we are with updated work on the daily chart.
What I can tell you about the daily chart is that I have projected many prior declines within the larger uptrend from the most recent high made on May 15. This has identified a key support decision that we are currently testing at the $43.13-$44.40 area. If price continues to hold above this price cluster zone, that is a good sign that AIG can continue higher sooner rather than later. If this same key zone is violated, I don't see any meaningful support (via my method) until the $38.58-$39.42 area.
That is all I can see as far as the lower support on the daily chart. So let's take a look at the weekly chart next and see if we can widen our horizons and see if that chart can provide us with some relatively important information.
Looking at the weekly chart tells me a few things. First of all, please refrain from calling me crazy for telling you that the bigger-picture target on the weekly chart of the October 2011 low remains intact at $74.75. First, we don't always make targets, but we do often enough that we should watch for them. Second, don't forget that this is a look at the much bigger picture.
This weekly chart also identifies a very important support decision that would come in below the market if the closer support on the daily chart does not end up holding. Since the weekly chart includes more data than my daily, I would defer to watching this lower zone on the weekly chart rather than the one posted on the daily chart. This zone comes in at the $38.55-$40.55 area.
Some of the most important price relationships within this second price cluster zone are the 100% projections of the prior declines, what I like to call symmetry. Other technicians will call these measured moves.
Bottom line, if price can hold above one of these key zones (hold 'em), I will remain bullish in AIG with a lofty upside target via the weekly chart. A failure to hold above these same key zones will get me to back off the buy side until further notice (fold 'em). As usual, I suggest that you use a trailing stop, just in case we don't meet our targets!
