American Eagle Stock Boasts Attractive Entry Point

American Eagle Outfitters Inc (NYSE:AEO) is underperforming the broader market, down 1.9% in 2024, versus a 4.6% year-to-date gain for the SPDR S&P 500 ETF Trust (SPY). Last seen down 0.6% at $20.77 this afternoon, AEO continues to distance itself from its Jan. 12, 52-week high of $21.68. However, a historically bullish signal indicates this recent pullback could lead to good things in the near future for the apparel retailer.

This is because American Eagle Outfitters stock just came within one standard deviation of its 50-day moving average after a lengthy period above the trendline. Per Schaeffer's Senior Quantitative Analyst Rocky White, there were four similar instances over the past three years. The stock was higher after all of these occurrences, averaging a one-month pop of 19.6%. A similar move from its current perch would put AEO just below the $25 level -- an area not seen since January 2022.

An unwinding of pessimism amongst the brokerage bunch could add even more tailwinds. Of the 10 in coverage, just two call the security a "strong buy." What's more, the shares sold short account for 10.9% of American Eagle stock's available float, so a short squeeze could be in the fold.  

These options are affordably priced at the moment, too. This is per the security's Schaeffer's Volatility Index (SVI) of 41% that sits higher than 21% of annual readings, suggesting these traders are currently pricing relatively low volatility expectations.