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My first earnings short-squeeze trade idea is
Intuitive Surgical(ISRG - Get Report), which is set to report its numbers on Tuesday after the market close. This company designs, manufactures and markets daVinci Surgical Systems, which are advanced surgical systems. Wall Street analysts, on average, expect Intuitive Surgical to report revenue of $418.02 million on earnings of $2.76 per share.
When it comes to reporting strong earnings, this company is a serial offender. Intuitive Surgical has beaten Wall Street estimates for the last four quarters, and many think it will do it for a fifth time this week. Profits have been trending up year over year by an average of 36.2% over the past five quarters. Revenue has also been in an uptrend, with the company registering double-digit year-over-year percentage revenue growth for the past four quarters.
The current short interest as a percentage of the float for Intuitive Surgical stands at 4.3%. That means that out of the 38.58 million shares in the tradable float, 1.64 million are sold short by the bears. This isn't a huge short interest, but since the float is so small, it's more than big enough to spark a solid short squeeze.
From a technical standpoint, this stock is currently trading above both its 50-day and 200-day
moving averages, which is bullish. This stock has been uptrending strong during the last couple of months, with shares making mostly higher lows and higher highs. The stock is now approaching a big breakout as we close in on their earnings report.
If you're bullish on this stock, I would buy it after its report if it can break out above $395.42 to $402.35 a share on
big volume. Look for volume that's tracking in close to or above its three-month average volume of 484,400 shares. If the stock can take out those levels, then I would add aggressively to any long position once it trades back above its
52-week high of $415.19 a share with volume.
On the flipside, I would short this stock after earnings if it drops below some near-term support at $380 a share on heavy volume. I would add to any short position if the stock then takes out its 50-day moving average of $367.23 a share. Look to target a drop back towards $360 to $355 a share if the bears knock this down post-earnings.
Intuitive Surgical, one of TheStreet Ratings'
top-rated health care equipment stocks, shows up on a recent list of the
10 Best-Performing S&P 500 Stocks of 2011.