Bulls look for American Eagle to take flight


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American Eagle Outfitters is starting to pick itself up after a major selloff, and call buyers are rushing in.


AEO optionMONSTER's Heat Seeker tracking system detected unusual activity in near-the-money September contracts on hopes the stock will regain some of the ground lost following a disastrous earnings release 11 weeks ago.


Traders snapped up more than 4,800 September 13 contracts for $0.55 to $0.70 and about 3,400 September 12 calls, mostly for $0.75 to $1.30. The September 14s also saw turnover north of 3,300, with most of the pricing at $0.35. Volume was above open interest in all three strikes.


AEO rose 4.22 percent to $12.84 yesterday. The call activity occurred late in the morning at the same time the shares were traded heavily, indicating purchases by an institutional buyer.


The retailer plunged by 17 percent on May 26 after projecting second-quarter profit of just $0.03 a share -- far below the $0.21 analysts had expected. The news overshadowed an inline report for the preceding quarter, and drove the stock down to levels it hadn't seen since September 2009.


AEO pushed lower before bottoming out at $11.35 a month later, and has been fighting its way higher since. Yesterday's buying drove the stock above its 50-day moving average, which may cause some chart watchers to expect further gains.


The company, which also got a boost from takeover rumors, will issue its next earnings report before the bell on Aug. 25.


Overall options volume in the stock was 8 times greater than average in the session. Calls accounted for a bullish 90 percent of the activity.


(Chart courtesy of tradeMONSTER)

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This article appears in: Investing , Options

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