This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

5 Stocks Set to Soar off Strong Earnings

Lufkin Industries

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

One earnings short-squeeze play in the oil well services and equipment complex is Lufkin Industries (LUFK), which is set to release numbers on Wednesday before the market open. On average, Wall Street analysts expect Lufkin Industries, a global supplier of oil field and power transmission products, to report revenue of $242.52 million on earnings of 60 cents per share.

This company has missed estimates for the last three consecutive quarters, but profits have risen year over year by an average of more than twofold for the past five quarters. This company recently cut its forecast for the third quarter, blaming materials shortages, shipment delays and other issues. The question now is whether these issues are priced into the stock and whether the company can say anything positive that could spike it post-earnings.

>>5 Rocket Stocks for Earnings Season

The current short interest as a percentage of the float for Lufkin Industries is a notable 7.3%. That means that out of the 29.64 million shares in the tradable float, 2.17 million are sold short by the bears. This is another low float high short interest situation, so this is one name I am expecting a lot of volatility in post-earnings.

From a technical standpoint, this stock is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been stuck in a nasty downtrend for the past five months, with shares regularly making lower highs and lower lows. That said, when the company recently cut its guidance, the stock sold off sharply on big volume. Since that selloff, the stock has rebounded from $42.10 to its current price of just over $50 a share.

The way I would play this stock is to wait until after they report and buy the stock if it breaks out above $52.32 a share with big volume. Look for volume that's tracking in close to or above its three-month average action of 618,800 shares. I would target a run back towards its 50-day moving average of $59.63 if the bulls can spark a short covering rally post-earnings.

I would get short this stock after it reports earnings only if it drops below $48 to $47.50 a share on heavy volume. Those levels are big previous support zones, so if the stock breaks below them, look for a sharp selloff. I would target a drop back towards $42.10 or possibly even lower if the bears whack this name lower post-earnings.

4 of 6

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • 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 Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,943.81 +28.74 0.17%
S&P 500 1,967.57 +2.89 0.15%
NASDAQ 4,415.49 +19.2860 0.44%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs