American Eagle Outfitters, Inc. (AEO) Approaches Key Support

American Eagle Outfitters, Inc. is a multi-brand specialty retailer, which offers an assortment of apparel and accessories for men and women under the American Eagle Outfitters brand, and intimates, apparel and personal care products for women under the Aerie brand. The firm operates stores in the United States, Canada, Mexico, Hong Kong, China and the United Kingdom.

Take a look at the 1-year chart of American (NYSE: AEO) below with added notations…

Chart of AEO provided by TradingView

AEO has formed a key level of support at $22 (green) over the past year. The stock looks like it may be making its way back down to that level again, and another bounce could occur. However, if the support were to break, lower prices will likely follow for AEO.

The Tale of the Tape: AEO has key support at $22. A trader could enter a long position at or around $22 with a stop placed under the level. If the stock were to break below the support, a short position could be entered instead.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!
Christian Tharp, CMT


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