Chart of the day: why we expect AIG to surprise on tomorrow's profit

American International Group (NYSE 🙂 struggles in a long-term, negative series of disappointing data. In the past eight quarters, the insurance multinational disappointed six times in terms of income. That is definitely not a good number.

However, it may be about to break that painful line in the future if the signals sent by the balance between supply and demand are correct.

The insurance giant is publishing business results tomorrow before the market opens for the fiscal quarter ending December 2019. Analysts expect it to report earnings per share of $ 1.01 on sales of $ 11.61 billion.

These estimates are based on the belief that AIG is likely to have increased its profits through higher prices, the 2018 acquisitions of Validus and Glatfelter, lower disaster-related claims, current insurance, policy resale and, finally, increased cost discipline.

And looking at the graph, there is something very interesting that should attract people's attention.

Last Thursday, the price broke free for the first time since June 2019, exactly one week before the release of business results. Every sudden change in investor activity is worth keeping an eye on, but when it happens a week before earnings, it is worth keeping both eyes wide open.

The outbreak includes a six-day straight advance of no less than 5% – even while the broader market suffered a sell-off – making it pass the 50, 100 and 200 DMA, one after the other, all in one fell swoop.

In the weekly chart, the price found support from the 50 and 100 WMA's and broke through the upper barrier of the range. It now looks at the 200 WMA, less than $ 56.

The pattern that emerges is a large falling wedge, considered bullish in an upward trend. This should be considered particularly promising when taking into account the 10% increase in one week at the beginning of May 2019, before prices ceased to be what appeared to be congestion.

The psychological driver of a falling wedge is similar to that of a flag, in which stronger hands take shares of weaker hands. The pattern tilts down because of supply pressure, but is overloaded instead of depressed because of the existence of demand

Finally, when the supply runs out, buyers are forced to increase their bids in order to find new, willing sellers who take them out of the pattern.

The implicit target is expected to be the height of the pattern from the point of breakthrough. Another practice is to aim for the highest price in the pattern. In another example of technical harmony, the two coincide. The height of the pattern is $ 6.57 – and that measurement brings you to the top of the pattern. However, this rarely happens.

Return movements are common – and note the falling star of yesterday, which implies fatigue. The RSI is also approaching an overbought level, while the remaining MACD indicator is still firmly in a bullish position.

Therefore, even if the news is not good, it could already be priced in, at least for the first leg, possibly driven by informed money.

Trading Strategies

Conservative traders avoid trading income. After the release, they would wait for a complete return to retest the integrity of the cartridge.

Moderate traders are likely to wait for the same pullback for better access, not necessarily asking for confirmation.

Aggressive traders can enter into a contradictory short, counting on market mechanics that first pulls the price down, such as pulling a bow for release. Attention, although traders can handle stop-loss, they can easily be skipped in the middle of a hole, causing much more losses than the trader intended. This step is only suitable for smart traders with the right temperament.

Trade sample – short set-up

Admission: $ 54.50
Stop loss: $ 55.00
Risk: $ 0.5
Target: $ 53.00
Reward: $ 1.50
Risk: reward ratio: 1: 3

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.