Do You See What I See?

Here we go again. Same format as before. Here you have a chart of American Eagle (AEOS). I want you to look this over, then leave a post telling everyone your thoughts/analysis. If you do not know how to leave a post, click here.

Try to follow this format if you will...
Give me pro's & con's of taking this trade
When would you get in? (what signal will you use?)
What would you trade option or stock?
If an option, which month and strike?
What relevant piece of info did you notice about this trade that nobody else did?

Add or subtract from that as you see fit. Try to respond to this asap since I am likely to provide my take on this tomorrow afternoon.

By the way, to any listeners I have left on my Credit Spreads trading room, I will not be presenting tomorrow. I have been working on trying to get an article I wrote posted on Forbes magazines website. Wish me luck, and I will try to get started a little earlier tomorrow.

Asdending triangle with a slight resistance around 46. Reward would be $4 the risk in my opinion would be 3 because the 43 support or the two times it bounced on 43. The good thing also is that the earnings is on the 14 of NOV so there is possibe time of the stock making a upward move.

looks llike an ascending triangle if it breaks up. I will wait for the break and vol in the 4million range

Although this is a small ascending triangle the stock seems to have lost some of its' strength. If it breaks above 46.50 with volume it could gain 3 points or so. If it breaks down below and closes below 44 with volume it may retreat to support at 38. Wait and see what the stock wants to do.

Two possibilites come to mind:
1. Continuation pattern in the form of an ascending triangle top line starting on 10/4 bottom starting on 10/6.
2. Potential reversal with a potential triple top as this is the third run at an attempt to break through resistance. The divergence on the on balance volume to the higher price action also supports the idea that keeping an eye out for weakness is warranted.

I have owned this as a stock since the break out on 3/1/06. Stops are tight as earnings are coming on 11/14.

Obvios resister at just above 46. Good uptrend in sector(r->y). If it broke 46, I'd do a Dec call at $50 and look for a $2 break out. Valuation Analysis says it estimated at 40.59. So I don't think is got much more uptrend. To be honest, I'd pass on it.
On a side note, what about NYX?

Ok, AEOS appears to be consolidating at an all time high. It also has a small ascending triangle and an earnings release coming up in two weeks. Additionally, this stock had a stock split on 3/7/2005 around $56. So, if you beleive that this stock is getting close to another split, I might buy the stock. Otherwise, I would be willing to play the breakout upbove $47 on high volume. I would buy the DEC $40 Call. I would exit if the stock retraced below $47.

If I buy the stock, I would again buy on a breakout above $47 and hold through the earnings release (expecting the split announcement) and buy a protective put before earnings to cover any potential losses (if the trade goes against me).

-M

There is bearish divergence showed by momentum indicator. plus the volume was decreasing while it attempting the triple tops. It could still break up above the asc. triangle (or the flag) I will enter to see which side it breaks with volume. Will buy ITM call/put for Dec as it is about 3-4 point play.

Divergence on the MACD. Triangle with top at arround 46.3 (could also call it tripple top). if the breakout from the triangle occurs I would look for volume for confirmation otherwise I will not take this trade. If the volume is there then there is a 3 point move up. If on the other hand the stock moves down past the previous low of 44.7 with volume a bearish trade can be taken for a possible 2 point move downward. For the bullish move the Nov 50 call has a delta of .25 so a 3 point move might only give me a 1 point result. A bull put spread of nov 45/40 might be better. For a bearish trade the Nov 45 put would be good.

Pros: This is a nice looking ascending triangle. I'd be looking for a breakout above 46.50 w/significant volume--probably an intraday entry considering you have a target of 3-4 points and this stock is capable of moving about half of that in a day.
I'd buy the $50.00 call. We have rising volatility. Earnings on the 14th and options expire on the 17th of November so its worth buying another month (Dec.) considering that the theta is melting at its quickest rate right about now for the front month. Volatility around the last earnings reached a level about 10 points higher than where its at now so we could see some help from that.
I'd exit on a close below support @ 46.50.
MACD & Stochastics won't mean much on a breakout. They'd be too far behind.
Cons Missing the trade when it happens.

Pros: strong stock in strong group moving up the big chart. Still in uptrend with higher lows in tact. MACD and Stochastics heading up and it recently found support at the 30 day MA.
Cons: Strong resistance at 46.60 set by big volume up day on 10/4 that was drastically swatted down. That line was confirmed by a Doji star of sorts followed by a down day making sort of an evening star reversal formation. That also happened at the back side of the former uptrending support line established from the daily lows(shadows)of 8/2 to 8/29. Though not a dramatic candle, that line was broken on 10/18 with heavier volume than the days leading up to it. Volume slightly higher on the selling side in October so far.
I don't really see an asc. triangle, but you could probably argue for a very thin one about three points wide. I wouldn't.

An upside directional play would be playable in the event of a big volume move above 46.60. However, the target is not clear to me as it seems to be flattening out and earnings is just over 3 weeks away, so that's not a lot of time.
Seems like it would be difficult to find an attractive trade in the short time before earnings. Sell the Nov 45/40 maybe on a breakout in the next few days, but beyond that, it'll be hard to get a good premium.
There's my take. Sorry if I wrote a Novel. ;)
Matthew

This retail stock is its 52 week high. With indices are making higher highes, i would buy OTM option and sell it before earnings announcement, if it breaks above the asc triange supported by above average volume.

I would take advantage of increasing volitality before earnings.

raaj

I see an asc, tri. if it breaks above 46.50 with heavy vol. I would expect a min. move of 3.50. Looking at the options table today I would buy dec 50 I would hold over earnings because it is an uptrending stock in uptrendding industry and christmas shopping is starting. I would set a mental stop at 46

Jeff -

Ascending Triangle with resistance at ~46.7. Initially thought this was a pennant forming due to shortness of pattern. Play it as a continuation pattern only if it breaks out to the upside on strong volume. Play an OTM call most likely in Nov as earnings are on the 14th of Nov. Third Quarter guidance was raised earlier this month so I do not expect any early warning signs of poor earnings.

Lina

I believe the ascending triangle and triple top (in particular) are too short to be viable indicators. I see this as an ascending channel that was broken out of, on the bottom side, five days ago (when I sold all the stock that I had) on weakening volume. I'm looking for a reversal here, especially with the bad news that has been hitting this company in the last few weeks. I think there are stronger stocks in this industry. If, however I'm out to lunch and there's a break-out of the triangle on very heavy volume, the $50 Dec Call would be my quick in... and I'd be out by around the 10th or 11th on the volatility that will accompany earnings.

I see an acsending triangle that is
wound up pretty tight, If it breaks
to the upside with good volume I
would enter quickly.As far as which
month november, since I dont have
a good understanding on forecasting
implied volatility (it seems to be
dropping)I would have to go in the
money even though its $$$$ and the
reward is less attractive but still
ok for me at about 50% on a 3 point
move. Steve L

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  • From Saratoga Springs, Utah, United States
  • I am a professional trader and an instructor for Investools. I've had relations with the markets for 9 years. Born in Concord, CA, but reside in Saratoga Springs, Utah. Father of THREE, Husband of one.
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