American Eagle Outfitters has been holding a key support level
at $12 for months, and now the bulls are trying the apparel stock
on for size.
optionMONSTER's Heat Seeker tracking system detected the purchase
of more than 8,000 February 15 calls for $0.70 against open
interest of just 522 contracts. The trade pushed total options
volume in the beaten-down retailer to more than 4 times the average
AEO is up 2.99 percent to $12.40 in late morning trading and is
pushing higher off the same level that served as support in July
2008 and resistance in March and April 2009. It had traded as high
as $19.64 in March.
The company has led declines among other consumer-discretionary
names since the spring. It provided weak second-quarter guidance on
May 26, followed by disappointing June same-store sales earlier
Today's call buyers apparently think the worst of the bad news is
over and expect the shares to climb through early 2011. They need
AEO to appreciate more than 26 percent through expiration for them
to turn a profit.
Upcoming events that could serve as potential catalysts for the
stock include the release of July same-store sales on Aug. 5 and
fiscal second-quarter earnings on Aug. 25.
Calls outnumber puts by a bullish 46-to-1 ratio in the name so far
today, according to the Heat Seeker.
(Chart courtesy of tradeMONSTER)
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