2 Financial Stocks That Could Bounce Big

American International Group Inc (NYSE:AIG) and Mastercard Inc (NYSE:MA) could rebound off their historically supportive 200-day moving averages

Sep 17, 2015 at 2:49 PM
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At Schaeffer's, we like to look at sentiment, but we also spend a lot of time digging into technicals. Part of our methodology requires careful attention to trendlines that have been significant in the past, as they can often signal an impending bounce. Two stocks that recently pulled back to key moving averages are insurance issue American International Group Inc (NYSE:AIG) and credit card concern Mastercard Inc (NYSE:MA).

AIG has advanced over 5% year-to-date, and was last seen at $58.93. However, after topping out at a six-year high of $64.93 in late July, the shares hit some turbulence, and touched their 200-day moving average. Historically speaking, this is a bullish indicator. Following the last 10 signals, AIG has rallied 78% of the time going out 21 sessions, with an average gain of 3.4%.

Option traders are certainly hopeful the equity will repeat history. AIG's 10-day call/put volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 4.54 -- with more than four calls bought to open for every put. What's more, this ratio ranks in the 83rd percentile of its annual range.

Further reflecting this optimism, American International Group Inc's Schaeffer's put/call open interest ratio (SOIR) sits at 0.70. This ranks below 78% of similar readings taken in the preceding year, suggesting short-term speculators are more call-focused than usual.

Meanwhile, MA has also pulled back to its 200-day trendline, which it's done five times in the past three years. Following this signal, the stock has advanced three-quarters of the time over a 21-day period, with a typical advance of 2%. Should this upside movement recur, it would build on MA's year-to-date gain of 8.7%, at $93.69 -- and help the security resume its quest for higher highs, which petered out at a record $99.18 on Aug. 10.

An upside move like that would likely put pressure on bearish option traders. Mastercard Inc has racked up a put/call volume ratio of 1.85 over the last 10 days at the ISE, CBOE, and PHLX -- a ratio that rests 2 percentage points from a 52-week peak. Echoing this, the stock's SOIR of 0.84 sits in the bottom quartile of its annual range.


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