AEO Gives us 100% Options Trade
On Tuesday we added a long model portfolio position in the American Eagle Outfitters (AEO) September 11.00 calls, as our pattern work argued for a positive response to the next morning's earnings release.
We wrote: "The technical set-up as well as a 29% Street short position suggest that it will not take much to light a fuse under AEO."
The company reported better-than-expected earnings, and the stock ran up 12% the next session, giving us a more than 100% gain on our options.
The first chart below shows what AEO did after our call.
The second chart shows the bigger picture of the stock. What our technicals had told us was that the stock had been carving out a base-like accumulation pattern since mid-April, and had absorbed some intense downside volume capitulation spikes.
In addition, the Apr-Aug 2014 basing action had been unfolding above the prior major low at 10.00 back in September 2011, increasing the potential for a secondary double-bottom low.
We noted on Wednesday, with the stock trading at 12.49, to expect additional strength that projects into the 13.60/90 target zone.
The stock closed Friday at 13.46.
More Top Calls From Mike
Eight weeks ago, Mike Paulenoff discussed the budding technical setup and upside breakout in CRWD (CrowdStrike Holdings) with our MPTraders members, writing:"CRWD has followed the bullish scenario we discussed in late August, and in fact, today (10/06/23) has thrust above 5 months of resistance to new recovery high territory at 176.32. Although my next optimal upside target zone is 190-200, the BIG picture setup points to 230-240 thereafter... Last is 174.86...
On Monday morning, November 13, 2023, a full 5 trading sessions before the approaching November Options Expiration (OPEX) (11/17/23), I posted my chart-based commentary for our members:SPY-- Considering that Friday is November Option Expiration, where are the "magnetized strike prices" as we start OPEX week? Based on my attached Hourly Chart, the magnetized strike price zone spans from 436 to 441. Should SPY take out the upside barrier of 441, then the follow-through outlier magnetized target could be as high as 450 before or on Friday.
On October 23, 2023, ten days before the November 1st FOMC meeting and policy statement, I posted the following commentary about the downward-spiraling TLT (20+ year T-bond ETF):My attached 4-hour Chart of TLT shows that the relentless and near-vertical downtrend that commenced at the beginning of August from around 100 hit a new long-term low at 81.92 this AM, positioning it in my intermediate-term optimal downside target zone from 80 to 82.
On the afternoon of September 25, Mike Paulenoff posted a warning signal to MPTraders members about the developing acute oversold condition in RTX (formerly Raytheon Technologies), writing:"RTX (formerly Raytheon Technologies) hit a new multi-month corrective low of 71.02, down 33% from the 4/10/23 post-pandemic High at 106.02. Although RTX has violated my optimal target window of 73-75, the stair-step corrective pattern off of the 4/19/23 high at 104.
On October 3, Mike Paulenoff posted the following "Heads Up!" about GLD (SPDR Gold Trust, ETF) for MPTrader members: "GLD has pressed to an important technical inflection window from 169.50 down to 166.30, from where I will be expecting corrective downside exhaustion off of the 5/04/23 high at 191.36, and new buying interest. From a nearer-term perspective, given the acute oversold but CONFIRMED Momentum reading of 17.16 an hour ago, my preferred scenario argues for another loop down that marginally violates today's low at 168.