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My first earnings short-squeeze candidate is
Sirius XM Radio(SIRI - Get Report), which is set to report its results on Tuesday before the market opens. This company is engaged in broadcasting music, sports, news, talk, entertainment, traffic and weather channels in the U.S. on a subscription fee basis through its two satellite radio systems. Wall Street analysts, on average, expect Sirius to report revenue of $752.57 million on earnings of 1 cent per share.
I am expecting a strong quarter out of Sirius driven by the recent robust numbers from
Apple(AAPL) for its smartphone and iPad products. Sirius currently has apps that work with Apple's iPad, iPhone and iPod touch, so strong Apple earnings should spill over to more sales for Sirius. It also has apps that work with other smartphones, such as Android models and BlackBerry phones. And let's not forget that car sales on average are up from last year, which should be a big boast to Sirius' earnings since the company is heavily tied to the auto market.
The current short interest as a percentage of the float for Sirius is a notable 7%. That means that out of the 3.88 billion shares in the tradable float, 274.57 million are sold short by the bears. It's worth mentioning that those bears have been increasing their bets from the last reporting period by 1.3%, or about 3.5 million shares. This stock doesn't have a small float, but with so many shorts in this name, it could easily see a decent short squeeze on strong earnings and bullish guidance.
From a technical standpoint, shares of Sirius are currently trading just below its 50-day moving average and above its 200-day moving average, which is neutral trend-wise for the stock. For the past two months, shares of Sirius have been making higher lows and that pattern will stay in place until the stock closes below $1.99 a share. The stock had been making higher highs until it recently broke that pattern a few weeks ago.
If you want to play Sirius for long trade, I would buy it after its report if you see the stock trade above $2.22 a share on heavy volume. I would add to any long position above $2.35 as long as the volume remains strong if the stock trades through that level. I would consider any move by Sirius above $2.44 with strong volume as very bullish since that will mean the stock is breaking out to new
52-week highs, and breaking out a past resistance level that has beaten back the bulls for some time now.
I would only short this stock post-earnings if Sirius slips below $1.99 a share on big volume. I would add to that position below $1.93 to $1.86 a share and look for a test of the 200-day
moving average of $1.79 if the bears take total control of this stock following their report.
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