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My first earnings short-squeeze candidate today is
Bon-Ton Stores(BONT - Get Report), which is set to report its results on Thursday before the open. This regional department store operator in the U.S. offers an assortment of brand-name fashion apparel and accessories for women, men and children, as well as cosmetics, home furnishings and other goods. Wall Street analysts, on average, expect Bon-Ton Stores to report revenue of $630.13 million on a loss of $1.63 per share.
This stock has been crushed in front of the quarter with shares down from a recent triple top at $10.50 a share to a recent low of $5.59 a share. Much of that beat down is due to the fact that Bon-Ton preannounced that total sales in July had fell 2.3% from the same period a year ago, and same-store sales had dropped 1.6% for July versus the same period. If all of this bad news is already in the stock, then anything positive management can say on the upcoming conference call could spark a relief rally.
The current short interest as a percentage of the float for Bon-Ton Stores is an extremely large 26.4%. That means that out of the 10.40 million shares in the tradable float, 3 million are sold short by the bears. This stock could easily explode into a big short squeeze since the short interest is so high and the float is so small. All that needs to happen is for the bulls to hear what they want to hear.
From a technical standpoint, this stock is trading below both its 50-day and 200-day
moving averages, which is bearish. The stock also recently formed a triple-top chart pattern at around $10.50 a share and broke below a major support zone at $9.30 a share on big volume.
The way I would play BONT is to wait until after it reports earnings and then buy the stock if it trades above $7 a share on
strong volume. Look for volume that's close to or greater than the three-month average volume of 211,000 shares. I would target a short-squeeze run that could take the stock back to its 50-day moving average of $8.88 a share if the bulls gain control of this stock.
I would short this name after its report only if the stock trades below $5.72 to $5.59 a share on big volume. Keep in mind that the relative strength index, or RSI, is currently showing a reading of 33 which indicates a very oversold condition. That doesn't mean it can get more oversold and trade much lower. It just means to be more cautions on the short side.
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