AIG's Powerful Bull Run Will Need a Rest Soon

NEW YORK ( TheStreet) -- American International Group's  (AIG) current bull trend, which includes four straight higher monthly lows, began on the first trading day of February. After suffering a deep selloff the prior month, AIG retested the major market low set back on Oct. 15. Investors jumped in immediately after the stock stabilized just below $49. The stock surged, gaining during 10 of the first 11 trading days in February. 

Very little give-back occurred during this initial rally phase until the old highs were reached. AIG stalled just below its 2014/January 2015 peak after a 17% run off the double bottom. The pullback that followed was textbook. AIG drifted lower on very light trade in late March before testing the 200-day moving average.

As April began, a second bull leg was underway. This move, with the help of a 50-day-moving-average cross, included 11 out of 12 positive closes. Although on lighter trade then the initial rally, the stock was able to move well past heavy resistance near the old highs.

Today AIG is working on another run after a shallow pullback. In late April the stock traced out a similar pattern after reversing near $59. The stock is trading at new highs today and is up for the fourth straight session. If the powerful bull channel that has been in place since February remains intact, shares will likely track a bit higher before a healthy rest is needed.

A rally just past $61 will test the upper band of the channel. A light-volume drift lower will offer a low-risk entry opportunity for AIG bulls. First layer of support is the April spike high just below $59.

More upside appears to be limited for now. Patience may prove to be a better strategy.

AIG is one of five stocks that the biggest hedge funds bought last quarter.

 

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

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