American Eagle Outfitters (AEO) announced a number of new actions as the company manages through the COVID-19 crisis. AEO suspended their buyback, deferred the Q1 dividend and issued a $400M convertible note. The company said they have enough cash to get through fiscal 2020. AEO was down 17% on the day. Given this background, let’s see what the charts tell us.
American Eagle Outfitters (AEO) Weekly Chart – annotations by askSlim.com
At askSlim.com we use technical analysis to evaluate price charts of stocks, futures, and ETF’s. We use a combination of cycle, trend and momentum chart studies, on multiple timeframes, to present a “sum of the evidence” directional outlook in time and price.
askSlim.com Technical Briefing: The weekly cycle analysis suggests that AEO is in a declining phase. The next projected intermediate-term low is due in the end of June. Weekly momentum is negative.
On the upside, there are intermediate-term resistances at 8.72 followed by another zone of resistance from 10.02 – 11.08. On the downside, there is a Fibonacci extension zone from 3.23 – 1.32. For the bulls to regain control of the intermediate-term, we would need to see a weekly close above 13.62 to repair some of the damage. At this point, the odds of this occurring are quite low.
askSlim.com Sum of the Evidence: AEO is in a declining phase in a very negative cycle pattern. Given these conditions, we would expect any rally to fail in the intermediate-term resistances beginning at 8.72. There is a likelihood the stock trades below 4 by July.
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