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An earnings short-squeeze play in the communications equipment sector is
Garmin(GRMN - Get Report), which is set to release numbers on Wednesday before the market opens. This is a provider of navigation, communication and information devices and applications enabled by global positioning system technology. Wall Street analysts, on average, expect Garmin to report revenue of $633.75 million on earnings of 66 cents per share.
Like Sirius, this company should also benefit from a pickup in sales in the U.S. car market from last year. Garmin beat Wall Street estimates last quarter but missed estimates in the quarter prior to that one.
The current short interest as a percentage of the float for Garmin is an extremely large 20%. That means that out of the 107.40 million shares in the tradable float, 21.46 million are sold short by the bears. The bears have also been upping their bets from the last reporting period by 6%, or by about 1.2 million shares. If the bears are caught leaning the wrong way here and Garmin posts strong numbers and guides higher, then the stock could see a decent short-covering rally.
From a technical standpoint, shares of Garmin are currently trading below both the 50-day and 200-day moving averages, which is bearish. The stock has also been making lower highs for the past couple of months, which is also bearish. That said, the stock seems to be finding some buying
support at around $32 to 31.50 a share.
The way I would play Garmin is to buy this stock following its report if it trades above the 50-day moving average at $33.10 and the 200-day moving average at $32.51 on
strong volume. I would add to any long positions above $34 and then $34.50 if the stock continues to rip higher post-earnings. My target would be the 52-week high at $36.42 a share.
I would only short this stock after its report if you see shares drop below $31.21 on big volume. I would add to any short position below $30 a share if the bears want to drive this stock lower.
Garmin is one of the
top-yielding electronics stocks.