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Hedge Fund Operational Due Diligence (follow link and submit comment)
While you were watching the news about the AIG bonus dustup, hope you didn’t miss on AIG the ticker symbol. It is still kicking around on the NYSE and as a penny stock, it put in an impressive wide range day:
I have no idea why it jumped on Monday since there wasn’t really any news (other than the bonus fiasco). But a 66% jump (from last week’s close) is juicy and as a daytrader, even if you can catch a fraction of it, you’re set.
Even if we ignore Friday’s close and only take it from the gap up open on Monday to the close, it was a 36%. Not too shabby. The intraday high at the magical, round number $1.00 - something really special about round numbers that acts almost like a magnet. The more you watch it, the more you see this stuff.
You don’t want to chase a runaway train so watching for an entry point is crucial. A great, low risk entry point was available at around 10:20 AM (green arrow). Price action paused and then retraced slightly with volume dropping off. If you notice, there was some resistance at $0.60, which was then broken to the upside. This then would have acted as support. So placing a stop under it would have allowed you to define your risk levels intelligently.
No one really knew, of course, that this would turn out to be a huge wide range, trending day. But the tip-off was the incredible volume, as well as the large gap up open. AIG had already put in a bottom last week and rallied impressively already from its low of $0.33 so there was something afoot.
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