Is American International Group Inc (AIG) Flashing a 'Buy' Sign?

American International Group Inc (AIG) could be ripe for a bounce, should prevailing bearish sentiment begin to unwind

Jun 9, 2016 at 1:25 PM
facebook X logo linkedin

After a rough start to the year, American International Group Inc (NYSE:AIG) has been busy staging a comeback, up nearly 12% since hitting an annual low of $50.20 in late February. And in its recent climb, the stock has found the support of its rising 40-day moving average -- a trendline to which the shares have pulled back today, last seen down 0.8% at $56.17. But looking at the stock's sentiment backdrop, as well as its historical performance on similar pullbacks, it appears AIG could have plenty of room to run.

AIG Daily Chart June 9

According to data compiled by Schaeffer's Senior Quantitative Analyst Rocky White, AIG has pulled back to its 40-day moving average a total of 11 times in the past three years. Across these instances, the shares have seen an average five-day return of roughly 0.7% -- positive 82% of the time. Looking out a bit further, this signal has yielded a typical 21-day return of 1.3%, positive 64% of the time.

The shares could be overdue for a boost from the brokerage corner, as well. Despite AIG's months-long rally, more than half of the analysts following the stock still call it a lukewarm "hold."

Pessimism has been similarly strong in the stock's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AIG has a 10-day put/call volume ratio of 1.34 -- higher than three-fourths of the past year's readings -- indicating traders have favored long puts over calls at an unusually high rate during the last two weeks. Of course, it's possible some of these puts were purchased by shareholders attempting to hedge.

This trend holds true among short-term traders, too. With a Schaeffer's put/call open interest ratio (SOIR) of 1.06, just 3 percentage points from a 12-month high, AIG has seen puts outweigh calls at a near-extreme pace, among options expiring in three months or less.

All that said, a round of bullish analyst attention or an unwinding of bearish bets in the options pits could help fuel AIG's rally back to its late-2015 levels. For traders who aren't ready to go long on the stock, this looks like an appealing time to pick up short-term AIG options. The stock's Schaeffer's Volatility Index (SVI) of 15% sits lower than 99% of all readings taken in the past year. That means premium on American International Group Inc's (NYSE:AIG) near-term options should be pricing in historically low volatility expectations at the moment.

Let us help you profit from market volatility. Target big gains in short order with a 30-day trial of Schaeffer's Weekly Volatility Trader!

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI