Bearish Trendline Could Ground American Eagle Stock

The stock has already shed more than 60% in the past 12 months

Digital Content Manager
Aug 15, 2022 at 12:23 PM
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The shares American Eagle Outfitters Inc (NYSE:AEO) have had a rough go of it this year. The security has shed 61.2% in the past 12 months, with a recent consolidation level emerging at the $13 mark. And while AEO is up slightly today, last seen at $12.85, with a more than 9% month-over-month lead under its belt, a historically bearish signal indicates that this could be a false start for the retail name. 

This is because AEO just came within one standard deviation of its 80-day moving average after a lengthy period below the trendline. Per data from Schaeffer's Senior Quantitative Analyst Rocky White, there have been five similar instances in the past three years. After 80% of these occurrences, the stock was lower, averaging a one-month drop of 10%. A similar move from its current perch would put AEO back below the $12 mark, and closer to its almost two-year low of $10.82 from late July. 

aeo aug 15

While the majority of analysts are lukewarm on American Eagle stock, it still looks susceptible to downgrades. Of the 12 in coverage, three still call the security a "strong buy." 

A shift in sentiment among options traders could also put pressure on the security. At the  International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AEO sports a 10-day call/put volume ratio of 3.2, which stands higher than 75% of readings from the past 12 months. In other words, calls are being picked up at a quicker-than-usual clip of late. 

 

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