3 Signals Suggesting Aspen Insurance Stock Is Primed for Higher Prices

aspen insurance stock
iStock.com/zaozaa09

AHL Stock: 3 Signals Is Not a Coincidence

The markets are downright treacherous and these wild swings have a great way of toying with one’s emotions. I know many investors who prefer to sit on the sidelines when volatility is as elevated as it is now, and who can blame them?

Spikes in volatility are like fits of emotions; eventually, the volatility will subside and cooler heads will prevail. So instead of watching the tape, I prefer to spend my time looking for compelling investments that contain certain characteristics suggesting that they are likely to appreciate.

Not every day is the same, but today is actually very special because I stumbled upon Aspen Insurance Holdings Limited (NYSE:AHL) stock. Do not let the name fool you; this may be a boring insurance stock but the price action on the AHL stock chart is anything but.

In March, when the markets were experiencing a tidal wave of selling pressure, AHL stock was completing a technical price pattern and breaking above a very influential moving average.

Advertisement

The completed technical price pattern and the influential moving average are highlighted on the following Aspen Insurance Holdings stock chart.

Chart courtesy of StockCharts.com

The price pattern highlighted on the Aspen Insurance Holdings stock chart is a double bottom price pattern.

A double bottom is a trend reversal pattern containing two troughs that hit a low at roughly the same price. These lows are usually separated by a peak in between, but in this circumstance, the peak is actually a lengthy level of price resistance.

This level of price resistance, which resided at $42.50, began in September 2017, shortly after the first low at $35.00 was established. For the next seven months, AHL stock was unable to break above this significant level of price resistance.

On March 19, 2018, after the second low was established, Aspen Insurance Holdings stock was finally able to break above the significant level of price resistance. This feat completed the technical price pattern, suggesting that a bottom was now in place and a trend reversal had begun.

What was really extraordinary about the completed price pattern is that it simultaneously broke above the 200-day moving average. For those who do not know, the 200-day moving average acts as a dividing line that separates stocks trading in a bull market from stocks trading in a bear market. When the Aspen Insurance Holdings stock price closed above the 200-day moving average, it went from being labeled as a bearish stock to a bullish one, reinforcing the bullish implications suggested by the completed double bottom price pattern.

The price action that followed involved a backtest, which is when the stock price returns to test a previous level of price resistance in order to reaffirm that the break above resistance was legitimate while simultaneously establishing it as a new level of price support. This price action was a textbook affirmation that AHL stock is currently geared toward higher prices.

If these coinciding developments were not enough of an indication that AHL stock is now geared for higher prices, the indication on the following Aspen Insurance Holdings stock chart should act as confirmation of this notion.

Chart courtesy of StockCharts.com

This AHL stock chart highlights a bearish trend, which began its development in March 2017 and was characterized by a progression of lower lows and lower highs, which is the quintessential attribute that defines a bearish trend.

The downtrend line highlighted in blue was created by connecting this series of lower highs that defined the bearish trend. This downtrend line acted as a level of price resistance, which acted much like the 200-day moving average, and as long as Aspen Insurance Holdings stock was trading below it, a bearish downtrend was in development.

That all changed on March 28, 2018, when Aspen Insurance Holdings stock broke above the downtrend line. This feat, which is highlighted as a breakout on the stock chart, suggests that the bearish trend that encompassed this investment since March of last year has finally concluded, opening the door for AHL stock to appreciate.

This breakout occurred seven trading days after Aspen Insurance Holdings stock broke above the 200-day moving average and completed the double bottom pattern. Three bullish signals in a matter of eight trading days, in a market as treacherous as this one, is a remarkable feat and suggests that this boring insurance stock is primed for higher stock prices.

Analyst Take

Three distinct signals have swung from bearish to bullish in recent weeks, suggesting that Aspen Insurance Holdings stock is likely to appreciate. The bullish view on AHL stock was created using technical signals generated from its stock chart. Therefore, I will maintain my bullish view until there are indications suggesting that a bullish view is no longer warranted.