My first earnings short-squeeze idea is Zep (ZEP), which is set to report its results on Thursday before the market open. Zep produces, markets, and services a range of cleaning and maintenance solutions for commercial, industrial, institutional, and consumer end-markets. Wall Street analysts, on average, expect the company to report revenue of $175.56 million on earnings of 37 cents per share.
This company is on tap to meet Wall Street estimates for the third consecutive quarter. Zep's profits have jumped year over year by an average of 33.8% over the past five quarters. Revenue has been trending up for the last three straight quarters.The current short interest as a percentage of the float for Zep sits at 4.2%. That means that out of the 21.44 million shares in the tradable float, 1.01 million are sold short by the bears. It's worth pointing out that the bears have also been increasing their bets from the last reporting period by 9.7%, or about 89,700 shares. This isn't a huge short interest, but it's big enough to spark a solid short-covering rally if Zep can report a decent quarter and guide higher. From a technical standpoint, this stock is currently trading above both its 50-day and 200-day moving averages, which is bullish. Zep recently found some big buying support at around $13.33 to $13.88 a share and since then has run up to its current price of $17.74 a share. Now the stock is setting up perfectly for a breakout trade if the right levels are tagged following earnings. >>5 Trading Setups to Ride This Rally I would look to buy this stock after it reports earnings if it can manage to break out above $18 a share on big volume. If we get that breakout, I would then add aggressively if the stock takes out some more overhead resistance at $19.30 a share with volume. Look for volume that's tracking in close to or above its three-month average action of 69,800 shares. Target a run back towards its 52-week high of $20.95 or possibly even higher if bulls gain control of this stock post-earnings. I would only get short this stock after earnings if it drops below its 50-day moving average of $16.20 a share on big volume. Target a drop back towards $14 a share or possibly even lower if the bears take this stock over post-earnings.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV