Insurance is the strongest subgroup within the broader financial sector, and individual names in the group continue to form bullish technical configurations on the daily charts.
Dow Insurance Index
The insurance stocks have also shown some strong liquidity inflows off of the March lows in the market, and breadth for the group has recently made a new high.
Money is flowing toward these stocks with some conviction, and the internal configuration of the group suggests that this sector can continue to advance through the end of the year.
The subprime lending crisis has weakened many of the subgroups within the financial sector, such as the regional banks and mortgage lenders. If you need exposure to financials, we would suggest sidestepping these problem groups and concentrating on the relative oasis of the insurance stocks. There is strong momentum, ample liquidity and further room to rally.
It has also been one of the better absolute price performers within the financial group over the past three months. This internal strength and price momentum continues to support individual names in the group. A majority of the stocks in this space either have, or are forming, bullish technical configurations, indicating further upside is likely. We have identified two stocks we see as opportunities to benefit from the sector strength.
is an international property and casualty, and reinsurance company. The stock has recently broken out to new highs as the stock extends the long-term primary uptrend.
ACE has pulled back off of the highs and formed a bullish continuation pattern, which suggests that the stock is ready to resume the primary uptrend and move out to new highs. The stock has significant support at the $56 level, but any break of that level would suggest a change in the bullish nature of the stock.
AIG International Group
is one of the largest property and casualty insurance providers in the world. The stock is steadily working its way back after the Greenberg issues, and it appears the bulls are back in control.
AIG is trying to emerge from the large base formation that has developed over the last five years. The stock is challenging the 52-week highs at $73 and is forming a bullish continuation pattern at this level. A breakout over the $75 level would confirm the long-term basing pattern and suggest that the stock is ready to establish a new primary uptrend.
AIG International Group
At the time of publication, Scott Maragioglio had no positions in any of the stocks mentioned, although positions can change at any time.
Maragioglio had more than 15 years of technical analysis and money management experience before co-founding Epiphany Research. Epiphany Research, which has developed and utilizes proprietary tools to identify and track liquidity changes in the market indexes and sectors. He is a member of the market technicians association (MTA) as well as The American Association of Professional Technical Analysts (AAPTA) and holds a Chartered Market Technician (CMT) designation. Mr. Maragioglio has also served on the board of directors of the AAPTA.