There's a while lot more directional bias in shares of big insurer AIG ( AIG). This stock has been shelling out some stellar performance in 2013, up more than 27% year-to-date. But this stock's recent price action indicates that it could be in store for even higher ground in the near-term.

>>5 Short-Squeeze Stocks Primed to Pop

That's because AIG is currently forming an inverse head and shoulders pattern, a setup that indicates exhaustion among sellers. Right now, AIG has only formed the left shoulder and head of the pattern, leaving the right shoulder yet to develop. But it doesn't really matter. Remember that in the real world, supply and demand forces matter a whole lot more than textbook pattern names -- so whether the right shoulder forms or not, AIG's trading implications remain the same.

This stock triggers a buy signal on a move through $46.

Lest you think that the head and shoulders is too well-known to be worth trading, the research suggests otherwise. A recent academic study conducted by the Federal Reserve Board of New York found that the results of 10,000 computer-simulated head-and-shoulders trades resulted in "profits that would have been both statistically and economically significant." That's good reason to keep a very close eye on AIG this week.

To see this week's trades in action, check out the Technical Setups for the Week portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.


Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

Follow Jonas on Twitter @JonasElmerraji

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