“Have you ever seen anything like that?” asked a new trader.

“The news isn’t new,” chirped a trader on Day 18 of his trading career.

“AIG traded up from 15 to 23 and I barely made any money how is that possible?”

Let’s discuss AIG and all the plays that will be like AIG going forward.

1) There will be many more AIG’s.  You didn’t miss the only great trading opportunity of the year.  And yes stocks really can just move like that.

2) Often breaking news hits and traders decide that the news is not significant.  Maybe the news is not new.   But that is not dispositive of whether AIG will trade higher.  Stocks go higher for one reason: there are more buyers than sellers.  Your opinion about whether this news warrants a higher push does not move the market.  If the stock spikes, consolidates, and then makes a new push higher, then get long, and leave your opinion for drinks after you crush the trade like many of the better traders on our desk (and then drinks on you).

3) As intraday traders it is frustrating to trade an AIG with a long bias but get shaken out frequently such that you do not kill the stock.  If this is the case then you have some work to do. What trades for your system would have worked?  Let me offer some help.

In the AIG’s of the world think about these trades:

a) The Pullback: wait for a pullback in AIG, get long, and hold until AIG makes a significant upmove.  If AIG trades against your entry price, hit AIG, reevaluate, gather information, and buy again at a better price.  But hold AIG into the significant upmove.  Do not wuss out and sell the dopey stock 9c into an 80c move.

b) The Scalp: wait for AIG to trade down too quickly and too far and then scalp the offer, wait for the stock to slow into the upmove, and then sell.  There are many 30c low risk trades to be made waiting for downmoves to overshoot.

c) The Held Bid: the safest play is to wait for AIG to pullback and then hold a bid.  Enter from this held bid and hold into the next significant upmove.  If the bid drops then hit, reevaluate, gather info, and if a bid is held again just below then buy it back.

d) Momentum: Buy every new intraday high, and hold until the stock slows, and then sell.  This play will generally work best the fresher the news.  With AIG as time passed, the Sell the New High Programs dominated.  So you had to buy into pullbacks and scrap buying breakouts.

These are patterns that work for stocks such as AIG on trading days like today.  You ought to have plays that work for you with an AIG.  I am going to go home soon and undoubtedly “Old School” will be playing on some movie channel that I have purchased and do not need.  And like I know that this movie will be somewhere I also am confident that there will be another play like AIG soon.  And like the great “Old School” they can get better every time.

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