AIG: Don’t Try to Catch the Falling Knife

Here’s an excerpt of a report we put out on Monday:

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AIG shares broke down through what had been solid support over the last three years on the second heaviest weekly volume on record going back to 1996. The breaking of support happened to coincide with news that outside auditors had found deficiencies in the way the company values some financial derivatives it has written based on collateralized debt obligations (CDOs). 

Additionally with a FusionIQ Technical Rank of only 12 (out of a possible 100) forward returns for AIG do not look promising. The next downside target for AIG shares is $ 32.00 (green line) and this aligns nicely with the objective point and figure derived target of $ 33.00. 

Analyst sentiment remains overly bullish with 14 BUYS and only 4 HOLDS, particularly given the recent breakdown in price.  We would expect to see the analyst recommendation skew migrate from its more bullish posture over the next several weeks/months bringing additional downward pressure to shares.

From a tactical trading strategy rallies into strength can be sold into to either exit long positions or put on new shorts positions.

American International Group (AIG)

Weekly Chart through Monday’s close

Aig_21208

chart courtesy of FusionIQ.com

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What's been said:

Discussions found on the web:
  1. karen commented on Feb 12

    talking about falling knives: NILE in after hours.

  2. SINGER commented on Feb 12

    It is down 26 straight points…

  3. bonghiteric commented on Feb 12

    I went short AIG and CINEFONZ Friday afternoon… made a boatload.

  4. Kp commented on Feb 12

    I am short homo-sapiens and long cockroaches.

  5. Street Creds commented on Feb 12

    Yeah, I got an extra bag at the Try and Save.

  6. Eric commented on Feb 12

    OT:

    Barry, do you still like Newmont or would you cut and run?

    Thanks

  7. mortgage guy commented on Feb 12

    The CEO of Goldman Sachs made a comment back in the fall that a lot of companies do not fully understand what is on their books but that they would soon find out. Not his exact words but something along those lines.

    On another bit of news, the 30 day freeze on foreclosures by some major lenders is rather interesting. The major increase for mortgage resets started in October 2007 which means NOD numbers would start reflecting these resets in Feb/March…but now we have to wait another 30 days.

    Get the feeling these resets made the NOD numbers skyrocket.

  8. Ross commented on Feb 12

    Marcus,
    You get a buscuit. Sugar buscuit. Don’t forget to hoard Palladium :0)

  9. AGG commented on Feb 12

    All of the king’s horses and all of Buffet’s Geico float won’t put AIG together again.

  10. dukeb commented on Feb 12

    AIG: Yet another great J Cramer pick from the past year! (Or was it a 5-second buy and sell and buy and sell and buy and sell for him?)

    So, what was up with the outlandish “Buffet Rescue” headlines today??? Seems like the MSM is coming around now and tempering their writers, but it really is beyond incompetence how they spin things so far from reality. They did the same with the recent Ebay release touting new reduced fees–all the MSM I saw took the PR Release bait and made its headline their headlines. Took a day or two later for reality to set in, which I’m sure was due to the fury of the general Ebay public taking them to task.

    I used to think people were the sheep and the media was the shepherd. Now I know the people are the sheep and the media is just the stink around them.

  11. Pool Shark commented on Feb 12

    I’m long knives and short patience.

  12. wally commented on Feb 12

    My personal belief is that when outside auditors have a difference of opinion with a company you should be running far, far away from that company. Any company.

  13. badhaikuguy commented on Feb 12

    Barry;

    What we need to see
    Is that Fusion IQ chart
    with buy/sell signals!

    LOL

  14. Sammy20 commented on Feb 12

    I can’t believe that idiot Paulson now has the balls to say “the worst is just beginning” and “everybody know that”….hello, he didn’t even think there was a problem 6 months ago.

    These guys are all liars & criminals!!!!

  15. Stuart commented on Feb 12

    Newmont? No. Goldcorp? Yes.

  16. kk commented on Feb 12

    The street downgrading AIG is another example of shuting the barn door after the horse gets out. Value added research at it’s best.

    Buffett gets another free pass. The cult is alive and well.

  17. kk commented on Feb 12

    The street downgrading AIG is another example of shuting the barn door after the horse gets out. Value added research at it’s best.

    Buffett gets another free pass. The cult is alive and well.

  18. E commented on Feb 12

    I’m all in cash. Well, I’ve also got a position in boats, to hold all the cash.

  19. wunsacon commented on Feb 13

    I’m following Winston Munn’s book: going short on honesty and long on obfuscation.

  20. Dave commented on Feb 13

    Barry, do you really believe in all of that techical-analysis mumbo jumbo? Every great investor says that it is a load of crap.

    I have caught many falling knives successfully. They can be some very profitable investments. Recent examples are COH, AEO and ARO and APOL.

    One of the reasons that you are getting the chance to buy them that cheap is that people tell you not to try to catch falling knives which creates a market inefficiency.

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