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5 Heavily Shorted Stocks to Squeeze the Bears

Jabil Circuit

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Another stock with the potential to see an earnings short squeeze is Jabil Circuit (JBL - Get Report), which is set to release results on Tuesday after the market close. This company, together with its subsidiaries, provides electronic manufacturing services and solutions in the Americas, Europe, and Asia. Wall Street analysts, on average, expect Jabil Circuit to report revenue of $4.19 billion on earnings of 56 cents per share.

This company missed Wall Street estimates last quarter after beating projections in the prior two quarters. Jabil Circuit has racked up double-digit year-over-year percentage revenue growth for the past four quarters. During that timeframe, the company has averaged growth of 30.8%.

The current short interest as a percentage of the float for Jabil stands at 5.2%. That means that out of the 194.46 million shares in the tradable float, 10 million are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 3.9%, or by about 373,600 shares. This is more than enough shorts in the stock to spark a solid short-covering rally if Jabil reports solid numbers and issues bullish guidance.

From a technical standpoint, this stock is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock formed a triple top between May through July at around $21.50 a share. Since marking that top, the stock slide all the way down to a recent low of $13.92 a share, but has since rebounded to just over $16 a share. During the recent rally off the lows, JBL has been making higher highs and higher lows. This shows at least for the near-term a bullish trend change.

I would be a buyer of this stock after it releases results once it trades back above some near-term overhead resistance at $17.76 a share on solid volume. Look for volume that's tracking in close to or above its three-month average action of 4.2 million shares. I would then add to any long position once the stock takes out its 200-day moving average of $19.28 with volume. I would target a run towards its 52-week high of $23.09 a share if the bulls gain full control of this stock post-earnings.

I would short this stock after its report only if it drops below $15 a share on heavy volume. I would then add heavily to any short position if JBL takes out $13.92 to $13.50 with volume. Target a drop back towards $12 to $11.50 if the bears whack this name lower post-earnings.

Jabil, one of the top holdings of Leon Cooperman's Omega Advisors, was also featured in " 5 Earnings Stocks for Selective Traders."

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