A good start for AIG but congestion now ahead

After a poor 2018 which saw the price of AIG stock fall by almost 34% during the year, 2019 is proving to be brighter, as the stock continues to rise in a bullish trend and recapturing most of these losses. Last week’s price action was dramatic with the stock rising strongly from $46 to currently trade at $51.64 and in sharp contrast to the prime indices which have seen significant falls triggered by concerns over the ongoing tariff debate. The question now is whether this strong performance is likely to continue in the short to medium term and there are two technical factors which suggest this is unlikely.

First, we have a volatility trigger which denotes a move outside the average true range with ultra high volume associated with the price action. This signals market maker participation and, as a result, the prospect of a reversal or congestion to follow. This is generally what follows as the market makers trap investors into weak positions in the ensuing congestion. Second, the stock is now testing a strong level of price resistance in the $52 area and denoted with the blue dashed line. The thickness of the line is calculated by the Quantum accumulation and distribution indicator for NinjaTrader automatically, and builds each time a level is tested and rejected, with the line then thickening as a result. This level is currently being tested, with a further region at $55 also on the horizon. So two reasons we can expect to see this stock congest over the next few weeks, and for any continuation, there are some sizeable barriers ahead, with the two levels outlined above, volume resistance is also high between the two, and finally the VPOC itself at $60.

So a good first half of the year, but a slowdown in bullish sentiment to follow.

By Anna Coulling

Charts from NinjaTrader and indicators from Quantum Trading