Aeropostale, Inc. - ARO - close 27.72 change -1.06 stop 29.55

Company Description:
Aeropostale, Inc. is a mall-based specialty retailer of casual apparel and accessories. The Company designs, markets and sells its own brand of merchandise principally targeting 14 to 17 year-old young women and young men. The Company also sells Aropostale merchandise through its e-commerce Website, www.aeropostale.com. During the fiscal year ended January 30, 2010 (fiscal 2009), the Company launched P.S. from Aeropostale, which offers casual clothing and accessories focused on elementary school children between the ages of 7 and 12.

Target(s): 27.00, 26.35, 25.25
Key Support/Resistance Areas: 29.35, 28.50, 27.50, 27.00, 26.30, 25,00
Time Frame: 1 to 2 weeks

Why We Like It:
ARO rallied hard last week making a double top with the highs from May 5. The retail sector has some catching up to do with the broader market declines as the sector is still several percentage points away from its February lows. I believe ARO is a vulnerable stock that is ready for sharper decline. I suggest readers initiate puts if ARO retraces some of its losses today and tests its 20-day SMA up near $28.20. This is also an intraday support/resistance area that is logical place for ARO to reverse back down. Our first target is $27.00 but ARO should be ultimatley be testing its 200-day SMA near $26.35 which is our 2nd target.

Suggested Position: Short ARO stock if it trades up near $28.20,

Option Traders:
Suggested Position: Buy July $27.00 PUT, current ask $1.60, estimated ask at entry $1.40

Annotated chart:

Entry on June xx
Earnings 8/19/2010 (unconfirmed)
Average Daily Volume: 3.3 million
Listed on June 7, 2010