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One earnings short-squeeze play in computer peripherals complex video game accessories maker
Mad Catz Interactive(MCZ - Get Report), which is set to release numbers on Wednesday after the market close. There are currently no analysts' estimates available for Mad Catz.
This stock is setting up for a big breakout if the company can manage to report a better quarter than its first quarter's weaker-than-expected earnings due to slowing demand. Revenue for the first-quarter dropped 17.3% to $16.5 million from $19.9 million a year ago. Sales dropped off due to weak demand from Europe and the termination of a third-part distribution agreement.
The current short interest as a percentage of the float for Mad Catz is notable at 3.8%. That means that out of the 61.52 million shares in the tradable float, 2.33 million are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a solid short-squeeze off any bullish results.
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From a technical standpoint, this stock is currently trading above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock plunged from its July high of $1.63 a share to a recent low of 55 cents to 54 cents a share. After hitting that low, the stock formed a double bottom at 55 cents to 54 cents and now sets up to breakout off any bullish earnings.
The way I would play this name would be to wait until after its report and buy the stock if it breaks out above 90 cents to $1.04 a share on heavy volume. Look for volume that's tracking in close to or above its three-month average action of 652,900 shares. If those levels are taken out, I would then add to any long position once $1.10 to $1.11 are breached with volume. Target a run back towards the 200-day moving average of $1.33 if the bulls gain full control if this stock post-earnings.