The charts and indicators of American Eagle Outfitters (AEO) were reviewed in the middle of March, when I wrote, "There are enough caution flags on the charts and indicators of AEO that traders who might be long AEO should consider booking profits. A close below the 50-day moving average line around $18.50 and below support around $17 should turn the price picture more bearish." Prices struggled until recently and fresh look at the charts is called for.
In this updated daily bar chart of AEO, below, we can see a rally from an August low. Prices are above the rising 50-day moving average line but this mathematical trend line was broken a number of times since August. The daily On-Balance-Volume (OBV) line has been in an uptrend the past twelve months and confirms the rally in the stock. The Moving Average Convergence Divergence (MACD) oscillator crossed back above the zero line last week for an outright go long signal.
In this first weekly bar chart of AEO, below, we can see that prices are above the rising 40-week moving average line. The weekly OBV line has been rising since August and just made a new high for the move up. The weekly MACD oscillator has been crossing down and back up recently.
In this weekly bar chart going back to 2002 we can see a long sideways trading pattern from 2009. A breakout over the 2012 high around $24 would be bullish.
In this Point and Figure chart of AEO on a closing basis, below, we can see a breakout over the 2012 high and a 2007 high. A longer-term upside price target of $47.50 is indicated.
Bottom line: AEO could be headed significantly higher based on a breakout from longer-term charts. Traders could go long risking to $19 and add on strength above $24. The $48 area is my long-term price target.