AIG Significant Breakout - Was This Coming All Along?

filed in Articles on Mar.19, 2009

There is no better way of teaching technical analysis than through hard core examples.

50 day EMA Breakout
Today was a particularly significant day in the stock market, especially if you have been following the recently suffocating insurance monster (AIG). Technical analysis proved itself worthy once again as AIG finally “broke out” of its 50 day EMA (Exponential Moving Average), after over a year of resistance. I absolutely love these setups! As you can see there were many “tests” of this resistance level throughout the last year, but no breakouts. These “failed” breakouts just continued to build up until the successful breakout of today. These “build ups” made today’s breakout even more significant. Traders and investors all around the world recognized this setup, waited for the breakout confirmation, and took advantage of the significant breakout. AIG closed at $1.38 today, nearly 43% more than the close of yesterday. Anyone that has been anticipating this breakout could have easily skimmed at least 5-10% off today’s move, if not more. AIG has been rallying for the last 4 days after a hammer candlestick with high volume. Remember, we can never predict the markets, we can only react…

Will the rally continue?
AIG is trading at $1.60 in the after hours, which is a very bullish sign. Usually there is a slight pullback after a successful breakout, not to mention two breakouts (20 & 50 day EMA), but we will see. Although the volume has been very high lately, we can’t predict the market, only react. On the other hand, around September 2008, there was a significant gap in price between two candlesticks. More times than not, price gaps are retraced to their origin, which is around the $11.50 level in this case. Though this will probably be a more long-term investment. We will have to be patient and see. I’m really looking forward to tomorrow.