Apparel and accessories retailer American Eagle Outfitters, Inc. (AEO) has been trading below a "death cross" since Nov. 20. This bearish signal is shown on its daily chart when the 50-day simple moving average crosses below its 200-day simple moving average and indicates that lower prices lie ahead.

The stock closed Friday, Dec. 7, at $18.96, up just 0.9% year to date and deep into bear market territory at 36.5% below its 2018 high of $29.88 set on Aug. 22. The stock is reasonably priced fundamentally with a with a P/E ratio of 13.74 and a dividend yield of 2.90%.

Analysts expect American Eagle to report earnings per share of 47 cents to 48 cents when the company releases results after the closing bell on Tuesday, Dec. 11. The retailer sells apparel and accessories to both men and women, as well as personal care products for women. If the retailer meets expectations, it would show year-over-year earnings growth of 27% on revenue just above $1 billion. Given the stock's decline since August, guidance on foot traffic this holiday season will be important.

The daily chart for American Eagle

Daily technical chart showing the performance of American Eagle Outfitters, Inc. (AEO) stock
Courtesy of MetaStock Xenith.

America Eagle stock has been below a "death cross" since Nov. 20 and traded as low as $18.51 on Nov. 20. There are four horizontal lines on the daily chart. At the bottom is my annual value level at $15.68. Then comes my quarterly pivot at $19.29 followed by my semiannual and monthly risky levels at $23.24 and $26.07, respectively. The stock is below its 50-day and 200-day simple moving averages at $21.65 and $22.70, respectively.

The weekly chart for American Eagle

Weekly technical chart showing the performance of American Eagle Outfitters, Inc. (AEO) stock
Courtesy of MetaStock Xenith.

The weekly chart for American Eagle is negative but oversold, with the stock below its five-week modified moving average of $21.05 and above its 200-week simple moving average at $17.05, which is also the "reversion to the mean," last tested during the week of Nov. 17, 2017, when the average was $14.67. The 12 x 3 x 3 weekly slow stochastic reading ended last week at 15.49, up from 14.16 on Nov. 30, with both readings below the oversold threshold of 20.00.

Given these charts and analysis, investors should buy American Eagle shares on weakness to the 200-week simple moving average at $17.05 and add to positions at my annual value level of $15.68. Investors should reduce holdings on strength to my semiannual and monthly risky levels at $23.24 and $26.07, respectively.