Since its Nov. 4 close shares of American International Group (AIG) have been on a tear. At Friday's peak the stock had surged over 12% during a six-day, post-election winning streak. This powerful ramp, which featured four gap higher opens, has reached a very significant area. For patient AIG investors a pullback may be soon on the way and with it, very attractive entry opportunities.
After rallying over 25% from the Brexit low, which held major support near the 2015 bottom, AIG fell into a narrow consolidation pattern. As the third-quarter earnings report neared the stock appeared headed for an upside breakout from this bullish set-up. The exact opposite happened on the morning of Nov. 3. AIG fell nearly 4% that day after a disappointing earnings report. This ugly breakdown could have lead to a steep sell-off but the stock quickly regained its footing near the September low.
After spending two post-earnings sessions under heavy pressure, AIG immediately returned to rally mode. The stock paused very briefly near it Nov. 3 earnings gap before heading into new 2016 high territory. By late last week AIG was testing a major supply zone near the 2015 highs. This key area, which runs from $65 to $64.20, marks four monthly peaks near the 2015 high. Considering the extent of AIG's current rally, further upside may be limited by this resistance area. Patient investors should keep a close eye on the $62 to $61 area as a consolidation phase begins. This key zone is marked by the stock's October/January highs. A test of this zone would offer a very low-risk entry opportunity than currently available.