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An earnings short-squeeze trade in the technology sector is
AZZ(AZZ - Get Report), which is set to release numbers on Thursday after the market close. This is an electrical equipment and components manufacturer, serving the global markets of power generation, transmission and distribution, and the general industrial markets. Wall Street analysts, on average, expect AZZ to report revenue of $115.87 million on earnings of 76 cents per share.
The current short interest as a percentage of the float for AZZ is a notable at 4.9%. That means that out of the 11.99 million shares in the tradable float, 587,631 are sold short by the bears. This is a stock with a very low float and a reasonable short interest. If the AZZ can beat Wall Street estimates and issue bullish guidance, then a big short squeeze could easily kick off.
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From a technical standpoint, this stock is currently trading below both its 50-day and 200-day
moving averages, which is bearish. The stock formed a double top back in July at around $53 a share and since then dropped to low hit this month at $38.77 a share. Since hitting that low, the stock has rebounded back up to $41.42 a share which is just below its 200-day moving average of $43.10.
The way I would play this stock is to wait until after its report and buy the stock if it trades back above its 200-day moving average on
big volume. Look for upside volume that's tracking in close to or above its three-month average action of 108,500 shares. I would add to any long position if the stock then trades above its 50-day of $45.31 with solid volume. Target a run back towards $48 or possibly higher if the bulls gain full control of this stock post-earnings.
I would get short this name if the stock fails near or at its 200-day moving average following its earnings report. I would target a drop back towards $38.77 a share which is the nearest support zone or possibly even lower if the bears whack this stock lower post-earnings.
AZZ is one of TheStreet Ratings'
top-rated electronic instruments stocks.