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TheStreet Open House

5 Toxic Stocks You Need to Sell

AIG

That's more or less what's happening right now in insurance giant AIG ( AIG). We last looked at the rectangle pattern forming in shares AIG back in early June, when the broad market was still inside its trend channel. Clearly, that's no longer the case.

>>4 Big Stocks on Traders' Radars

AIG broke down below $43 in yesterday's session, sparking a sell signal for shares. While the relatively tight range of AIG's triangle means that downside is likely to be pretty contained, there's still a while to go before AIG hits support around $39.

Whenever you're looking at any technical price pattern, it's critical to think in terms of those buyers and sellers. Triangles, rectangles and other pattern names are a good quick way to explain what's going on in a stock, but they're not the reason it's tradable. Instead, it all comes down to supply and demand for shares.

That support level at $43 was a price where there had been an excess of demand of shares; in other words, it's a place where buyers were more eager to step in and buy shares at a lower price than sellers were to sell. That's what makes the breakdown below $43 so significant. The move indicates that sellers are finally strong enough to absorb all of the excess demand above that price level this week.

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