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One more earnings short-squeeze idea is
Safeway(SWY), which is set to release numbers on Thursday before the market open. Together with its subsidiaries, Safeway operates as a food and drug retailer in the U.S. and Canada. Wall Street analysts, on average, expect the company to report revenue of $9.84 billion on earnings of 35 cents per share.
Safeway has topped Wall Street estimates for the past four quarters in a row, and it's coming off of a quarter in which it beat estimates by 2 cents, after it reported net income of 41 cents per share versus estimates of 39 cents per share. Revenue has also been trending up for the past three straight quarters.
The current short interest as a percentage of the float for Safeway sits at 8.5%. That means that out of the 348.04 million shares in the tradable float, 29.48 million are sold short by the bears. This is a high enough short interest to spark a solid short-covering rally on a bullish earnings event.
From a technical standpoint, the stock is currently trading right at its 50-day moving average and below its 200-day moving averages, which is neutral trendwise. This stock has been hammered during the past couple of months, dropping from its July highs of $24.08 to a recent low of $15.93 a share. The stock has now formed a basing trading pattern, as shares move between $18.83 on the upper end and around $16 on the lower end. A break out of this pattern should define the next trend for this stock in the near-term.
I would look to be a buyer of this stock after earnings if it can manage to trade back above the 50-day of $17.48 and then above that big overhead resistance at $18.83 a share with big volume. A big volume move above those levels should set this stock up to re-test its 200-day moving average of $21.17, or possibly go even higher. Watch for volume that's tracking in close to or above its three-month average action of 6.69 million shares.
I would get short this stock only if shares drop below $15.93 with big volume after its report. A move below that level with strong volume should result in a big flush on this stock since that's the last level of support for the past three-years, and it would push this name to a new 52-week low. Target a 10% or more drop if we lose that level with volume post-earnings.
Safeway, one of TheStreet Ratings'
top-rated food and staples stocks, is also one of the
highest-yielding retail stocks.
To see more potential earnings short squeeze candidates, including
Valmont Industries(VMI) and
J.B. Hunt Transport Services(JBHT), check out the
Earnings Short Squeeze Plays portfolio on Stockpickr.
-- Written by Roberto Pedone in Winderemere, Fla.