5 Earnings Stocks Poised to Pop

Molycorp

My first earnings short-squeeze candidate is rare earth metals producer Molycorp(MCP), which is set to report its results on Thursday after the market close. Wall Street analysts, on average, expect Molycorp to report revenue of $161.57 million on earnings of 70 cents per share.

If you're looking for a beaten-down short-squeeze play in front of earnings, then one name to take a hard look at is Molycorp. This stock dropped from its August high of $66.62 to a recent low of $29.19 a share. Since printing that low, the stock has rebounded a bit and now trades at close to $42 a share.

The current short interest as a percentage of the float for Molycorp is an extremely large 26%. That means that out of the 51 million shares in the tradable float, 13.45 million are sold short by the bears. The short-sellers have also been increasing their bets from the last reporting period by 4.2%, or by about 539,800 million shares. This huge short interest, combined with the recently added bearish bets, could easily set off a monster short-squeeze if Molycorp can deliver what the bulls are looking for.

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From a technical standpoint, this stock is currently trading below both its 50-day and 200-day moving averages, which is bearish. That said, the stock just yesterday started to break out above some past overhead resistance at $40.53 on strong volume. Volume on Monday registered 5.2 million shares, which is well above its three-month average action of 4.88 million shares. Now the stock is approaching an even bigger breakout if it can manage to move back above its 50-day moving average at $42.25 before the report.

If you're bullish on this stock, I would buy the stock after it reports earnings if it manages to trade back above its 50-day moving average of $42.25 on heavy volume. Look for volume that's tracking in close to or above its three-month average volume. If the stock moves above that level before Thursday, then buy it after earnings off any noticeable strength as long as the 50-day holds and isn't breached. I would target a run back towards the 200-day moving average of $53.14 if the bulls gain full control of this stock post-earnings.

I would get short this stock after its report only if it fails to get back above the 50-day or if it trades above the 50-day and then drops back below. Clearly, watching how this stock acts around the 50-day after earnings should be the key to the next big trend for the shares. I would then add to any short position if MCP takes out its near-term support zones at $36.3 to $34.41 on heavy volume. Target a drop back toward $31 to $30 if the bears slam this stock lower post-earnings.