Chart of the Day – ALL and TRV on Talking Numbers

by Enis August 28, 2012 12:44 pm • Commentary

Here’s a preview of what I’ll be discussing on Talking Numbers today between 3:20 and 3:30 pm EST on CNBC:


ALL and TRV are two property-casualty insurance stocks that have both recently hit new highs, 3 year highs in the case of ALL, and all-time highs in the case of TRV.  Though last year was difficult for property-casuatly insurers due to the numerous natural disasters, this year has been much more benign, and that has naturally fed into plump profits and high stock prices.  These stocks have shown impressive relative strength vs. the market all year, but their current levels are not good entry points on the long side.

This is a 3 year chart of ALL:



The stock has shown significant strength this year, breaking to 3 year highs in the past month on strong volume.  I view that strength as a harbinger of good things to come for ALL in the future, but I would not be a buyer of the stock here.  ALL’s strength moved it more than 20% above its 200 day moving average, which has generally led to consolidation or selling in the subsequent months in the 3 previous occurrences over the past 3 years (circled in red).  A pullback to near the 35 level of support might offer a good entry on the long side.

This is a 1 year chart of TRV.



The stock actually made new all-time highs in August, which is also a sign of relative strength and normally a good sign for technical analysts.  But the breakout was tepid and has stalled at the $65 breakout level, indicating a lack of enthusiasm.  I think a pullback in TRV is likely as well, and would view the 60-62 support area as a great entry on a strong long-term story.