Trade of the Day: Breakout Could Power Double-Digit Run in AIG Stock

Buy American International Group Inc on a pullback for a challenge of its late-2015 highs

American International Group Inc (NYSE:AIG) — Shares of AIG stock broke out last week, rallying more than 7% on Aug 3 after the big-cap insurance company beat analysts’ earnings estimates and increased its share repurchase program by $3 billion.

Following the earnings report, S&P Capital IQ Equity Research reiterated its “Buy” rating on AIG stock and upped its 12-month price target by $2 to $64.

Then, on Monday, Goldman Sachs added AIG stock to its “Americas Conviction List” with a $68 target. Benzinga noted the recommendation was due to AIG’s “increasingly attractive risk/reward profile.” The Goldman Sachs analyst also said the insurance company is closer to securitizing its life reserves, which could add $4 billion to $5 billion in additional capital.

Turning to the chart, we see AIG stock executed a breakaway gap on very high volume on Aug. 3 after the better-than-expected earnings report. This was followed by a strong buy signal from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR). In addition, it sliced through its bearish resistance line at $56, which was coincidentally merged with its 200-day moving average.

Be aware that AIG stock is not in a bull market. The next challenge for shares will be the twin highs from November and December at $63 to $64. But the power of the Aug. 3 breakout should carry shares to my target of $68.

However, after such a huge breakout, stocks will often succumb to profit-taking. So, traders should look to buy AIG stock on a pullback to $58 with a trading target of $68 for a potential return of more than 17%.

Long-term investors should consider adding shares their portfolio for even higher capital gains and income. American International Group pays a quarterly dividend of 32 cents per share for a forward annual yield of 2.2%.

AIG Stock Chart
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Article printed from InvestorPlace Media, https://investorplace.com/2016/08/american-international-group-inc-aig-stock-trade-of-the-day-2/.

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