Popular Retailer Ripe for Bullish Attention

Following a pullback from four-year highs, retail stock American Eagle Outfitters Inc (NYSE:AEO) is now above layers of technical support on the charts, including a region that provided resistance throughout the second half of 2024. The stock is also sitting just above the put-heavy 23 strike, which is near its December low after a post-earnings bull gap.

Despite the recent peak and 40% year-over-year gain, 11 of the 13 analysts covering AEO rate it a “hold” or worse, while short interest represents 10.8% of the stock’s available float. Should some of this pessimism begin to unwind, it could provide tailwinds.

Furthermore, data going back to 2021 shows that AEO has seen strong call option returns on Fridays when the stock was below its ascending 50-day moving average.

It's also worth noting that the retailer has a huge buyback program, and they’re likely to buy back shares on pullbacks (only 11 million of the 50 million shares have been bought back since announced in March of 2025).

Our recommended May call has a leverage ratio of 4.1 and will double on a 25.7% rise in the underlying equity.