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5 Breakout Stocks to Trade for Gains

American International Group

American International Group (AIG - Get Report), the controversial insurance giant, is another name that's looking bullish from a technical standpoint in April. Shares starting forming a rounding pattern at the start of March, and a confirmed breakout in yesterday's session points to some more legs to the 34% rally AIG has enjoyed year-to-date.

Typically, a rounding pattern is seen at the bottom of a firm's price action (there, it's better known as a "rounding bottom"). The pattern in AIG is a good example of why it's never a good idea to just memorize the rules associated with popular patterns -- instead, it's much better for traders to understand what actually causes them.

In the case of AIG's rounding pattern, this setup indicates a gradual shift in control from sellers to buyers. The breakout level comes in at the resistance level where the pattern began; that's significant because that $30.50 resistance level is a price where AIG's uptrend got derailed.

So we know that there's a glut of supply of shares at $30.50 where sellers are more eager to sell and take gains than buyers are to buy. Yesterday's breakout above that price level now tells us that the excess supply has finally been absorbed by buyers.

If you decide to take this trade in AIG, I'd recommend keeping a protective stop at $28 support.

AIG, one of Bruce Berkowitz's holdings, was also featured last month in " 5 Stocks Insiders Love Right Now."

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