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If you're looking for an earnings short-squeeze play in the retail apparel sector, then consider
Guess?(GES - Get Report), which is set to release numbers on Wednesday after the market close. This company designs, markets, distributes and licenses apparel and accessories for men, women and children. Wall Street analysts, on average, expect Guess? to report revenues of $656.38 million on earnings of 81 cents per share.
This company has been performing at a high-level during the past couple of quarters. Guess? has beat Wall Street estimates for the last four quarters in a row and the most recent quarter produced a huge beat that topped estimates by 1l cents. Revenue has also been trending up during the last four quarters between a range of 9.8% and 17.9%.
The current short interest as a percentage of the float for Guess? is a rather large 6.4%. That means that out of the 69 million shares in the tradable float, 4.34 million are sold short by the bears. It's worth pointing out that the short-sellers have also been increasing their bets from the last reporting period by 15.6%, or by around 584,000 shares. This notable increase in bearish bets could fuel a big short squeeze if the bears are caught leaning the wrong way into earnings.
From a technical standpoint, the stock is currently trading significantly below its 50-day and 200-day moving averages, which is bearish. The stock has been hammered during the past few months from a high of $44 a share in mid-July to its current price of just over $31 a share. That said, shares of GES have found some buying support recently at around $30.20 a share.
The way I would pay this stock is to buy it after they report if it trades above $33 a share on big volume. Look for volume that's close to or greater than its three-month average action of 1.4 million shares. I would add to any long position once this stock clears some past overhead resistance at around $35 a share. Target a run back towards the 50-day moving average ($38.79) if the bulls can spark a big short squeeze.
I would only short this name if it drops below that near-term support zone at $30.20 a share on heavy volume after they report. I would add to any short position once shares of GES takes out $28.75 a share on big volume, and target $25 to $23 a share if the bears want to pound this name ever lower.