From a technical perspective, shares of American Eagle Outfitters have been downtrending badly over the last six months, with shares falling from its high of just over $16.50 to its recent low of $10.83 a share.
During that downtrend, shares of AEO have been making mostly lower highs and lower lows, which is bearish technical price action. That bearish price action has also driven shares of AEO below both its 50-day and 200-day moving averages. That said, shares of AEO have started to show some signs its declines could be over with the stock starting to bounce off its 52-week low of $10.83 a share, which also corresponds with its 2012 low near $10.98 a share. That bounce is starting to push shares of AEO within range of triggering a near-term breakout trade.
Traders should look for long-biased trades in AEO as long as its trending above its 52-week low of $10.83 and then once it breaks out above some near-term overhead resistance levels at $11.37 to $11.53 a share and then just above more resistance at $11.75 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 5.33 million shares. If that breakout triggers soon, then AEO will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $12.71 to around $13 a share. Any high-volume move above those levels will then give AEO a chance to tag $14 to $15 a share.
Traders should put shares of AEO on their breakout trading radar here, since the stock could easily catch some of the momentum that's hit other names in the space of late. This stock is beaten down over the last six months, and considering some of the sector strength, a trend change could be developing quickly here for shares of AEO.
-- Written by Roberto Pedone in Delafield, Wis.