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5 Stocks Set to Soar on Strong Earnings

Daktronics

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My first earnings short-squeeze idea is Daktronics (DAKT), which is set to report its numbers on Tuesday before the market open. This is a supplier of electronic scoreboards, large electronic display systems, and related marketing services, digital messaging solutions, software, and services for sporting, commercial, and transportation applications. Wall Street analysts, on average, expect Daktronics to report revenue of $128.72 million on earnings of 13 cents per share.

This company missed Wall Street estimates last quarter, so investors will be looking for a much better showing for this quarter. The current short interest as a percentage of the float for Daktronics is 3.4%. That means that out of the 36.42 million shares in the tradable float, 1.22 million shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a short-squeeze off a bullish earnings report.

From a technical standpoint, this stock is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock was hammered down from its July high of $11.37 to a recent low of $8.04. After hitting that low, the stock formed a double bottom when it re-tested $8.01 in October and then rallied to a high of $10.73, before setting in at its current price of $9.50.

>>Stocks Hitting New 52-Week Highs

If you're bullish on this stock, I would look to get long after it report its results if the stock trades back above its 200-day moving averageat $10.26 on high volume. Look for volume that's tracking in close to or above its three-month average of 141,042 shares. If we see that move post-earnings, I would then add to any long position once the stock takes out some near-term overhead resistance at $10.73. Target a run back toward $11.37 or possibly higher if the bulls gain full control of this stock.

I would get short or avoid any long trade on DAKT after it releases its results if the stock drops below some near-term support zones at $9.20 to $9 a share on heavy volume. A drop below those levels will setup a re-test of $8 a share. I would add to any short positions if the stock takes out $8 a share with heavy volume.

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