5 Insurance Stocks To Watch In The Wake Of Hurricane Ida

On Sunday, Hurricane Ida rushed ashore Louisianna on the 16-year anniversary of Hurricane Katrina. The 2005 storm took the lives of 1,800 people and caused more than $100 billion in damage, $40 billion of which were reported as insured property damage.

Well established insurers such as Allstate Corporation ALL, American International Group AIG and Chubb Limited CB could suffer losses in the wake of Hurrican Ida, as could newer tech-based insurers such as Lemonade, Inc LMND and Root, Inc ROOT.

“Our early view is that insured losses may surpass the roughly $10 billion of 2020’s Hurricane Laura and could approach $30 billion. The magnitude will depend on damage to New Orleans and commercial energy interests,” said Matthew Palazola, senior industry analyst, and Kylie Towbin, associate analyst at Bloomberg Intelligence.

The extent of the damage, and the effect on the company’s bottom line, likely won’t be known for some time and for traders who use technical analysis to inform their investment decisions, the stocks have clear patterns and levels that can be followed regardless of news.

The Allstate Chart: Allstate has been trading in an uptrend since created a bullish double bottom pattern on July 15 and Aug. 5 near the $124.80 level, making a series of higher highs and higher lows. On Aug. 25, the stock attempted to break up above the May 14 and May 26 all-time high of $140 but failed and created a bearish triple top pattern. Allstate has since traded lower in consolidation but maintained its uptrend.

Allstate looks to have put in its daily higher low at the $134.71 level. When the stock reached the level bulls came in and bought the dip. This caused Allstate to print a bullish hammer candlestick, which indicates the stock will trade higher although confirmation of the reversal will need to be seen on Tuesday.

Allstate is trading above in line with the eight-day exponential moving average (EMA)and above the 21-day EMA with the eight-day EMA trending above the 21-day, both which are bullish indicators. The stock is also trading above the 200-day simple moving average (SMA) which indicates overall sentiment in the stock is bullish.

Bulls want to see big bullish volume come in and pop Allstate back up above a resistance level at $136.54. If the stock can regain the level as support, it can make another run toward its all-time high.
Bears want to see big bearish volume come in and drop the stock down below support of the eight-day and 21-day EMAs. If Allstate loses the levels, it could retest a lower support at the $133 mark and if the stock trades below the level the uptrend will be negated.

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The AIG Chart: AIG gapped up almost 3% higher on Aug. 6 after printing earnings. The stock then ran over 11% higher over the course of the following 14 trading days to reach a 52-week high of $55.50 before consolidating and trading sideways on the daily chart.

The consolidation has helped AIG to cool down its relative strength index (RSI), which measured in at 71% between Aug. 13 and Aug. 16. When a stock’s RSI measures in at over 70% it enters overbought territory which is a sell signal for technical traders.

Traders should be aware of the gap below between about $48.80 and $50. Gaps on charts fill 90% of the time and it is likely AIG will trade back down into the price range in the future.

Like Allstate AIG is trading above the eight-day and 21-day EMAs and the 200-day SMA. For the past three trading days, AIG has tested the eight-day EMA as support and held above it.

Bulls want to see continued consolidation on low volume for AIG to power up for a move over its 52-week high. If the stock can make a new high over the $55.50 level, it will have no resistance until the $57.67 mark.
Bears want to see big bearish volume come in and drop AGI down below support at the eight-day EMA. If the stock loses the level as support, it could fall toward $52.54.

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The Chubb Chart: Chubb made a new all-time high of $187.90 on Aug. 23 and has spent the past five trading sessions consolidating. The consolidation paired with the 11% move higher between Aug. 5 and Aug. 23 has settled Chubb’s stock into a bull flag pattern on the daily chart. If the pattern is recognized the measured move could bring Chubb’s stock to about the $203 level in the future.

The consolidation has helped Chubb cool its RSI down to the 65% level after hovering near the 75% mark for a number of days. Bullish traders will want to see the RSI cool even a little further for the stock to power up for another break to a new all-time high.

Chubb is trading in line with the eight-day EMA and above the 21-day EMA with the eight-day trending above the 21-day, both of which are bullish. The stock is also trading about 13% above the 200-day SMA.

Bulls want to see big bullish volume come in to break Chubb’s stock up to a new all-time high. If the stock can regain the $187.90 level as support, it has no further resistance in the form of price history.
Bears want to see big bearish volume come in and break Chubb down below the eight-day EMA and down through the channel of the bull flag to negate the pattern. If this happens, Chubb’s stock could retest support at the $180 level, which is in line with the 21-day EMA.

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The Lemonade Chart: Unlike Allstate, AIG and Chubb, Lemonade has been struggling to regain ground since falling over 68% between its Jan. 12 all-time high of $188.30 and its May 13 low of $58.83. Although after putting in the low Lemonade rebounded 96% up to a high of $115.85, it then entered into a downtrend and fell back to the $67.50 level.

The downtrend created a trendline of resistance that Lemonade’s stock tried to break up from on six separate occasions before successfully bucking the trend on Aug. 24. Since then, Lemonade has tested the trendline as support four times and held above it which demonstrates the trendline is a recognized pattern.

On Friday Lemonade was able to regain the eight-day EMA as support and on Monday the stock tested the level and held above it. The stock is trading well below the 200-day simple moving average, however, which is bearish.

Bulls want to see Lemonade’s stock rise up above the 21-day EMA and for continued bullish momentum to push the stock higher so that the eight-day EMA crosses above the 21-day. Lemonade has resistance above at the $80 and 86 levels.
Bears want to see big bearish volume come in and drop Lemonade’s stock back down below the descending trendline which will cause the stock to lose support at the $67 level. If Lemonade loses the level as support it could fall toward the $58.83 mark.

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The Root Chart: On Monday Root gapped up about 20% higher but ran into a group of sellers and fell back down and filled the entire gap. The stock is trading down almost 80% from the Oct. 28 all-time high of $29.48 it made the day it went public.

Root is heavily shorted with a high level of ownership, which makes it a short squeeze candidate. Insiders and institutions own 81.84% of Root’s 93.72 million share float with 19.4% of the total shares held short. If big bullish volume comes in and pushes the stock up further over the $8.33 level the traders who are short may be forced to cover which could make Root skyrocket.

The stock is trading above the eight-day and 21-day EMAs but the eight-day EMA is trending below the 21-day EMA which shows bullish indecision. Root will need to hold above the eight-day EMA for a number of days for the eight-day to cross back above the 21-day. The stock is also trading below the 200-day SMA which just became available on Root’s chart on Aug. 13,

Bulls want to see big bullish volume come and drive Root’s stock up over resistance at the $6.98 level and then for momentum to break it back above $8.33.
Bears want to see sustained big bearish volume drop Root’s stock down below the 21-day and eight-day EMAs. If the stock loses the levels as support it could fall back to its all-time low of $5.19.