My final earnings short-squeeze candidate is food processing player Hormel Foods (HRL), which is set to release numbers on Tuesday before the open. Wall Street analysts, on average, expect Hormel Foods to report revenue of $2.11 billion on earnings of 42 cents per share.
This stock sets up for a perfect breakout or breakdown trade as we head into their earnings report. What I mean by that, is Hormel is trading very close to some key breakout levels that sit just above it, and its trading right near both its 50-day and 200-day moving averages. A move outside of either range will set this stock up for a post-earnings spike.The current short interest as a percentage of the float for Hormel Foods is 5.9%. That means that out of the 135.74 million shares in the tradable float, 7.97 million shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a decent short interest if the company can deliver what the bulls are looking for. From a technical standpoint, this stock is currently trading above both its 50-day and 200-day moving averages, which is bullish. That said, this stock recently ran into some overhead resistance at $30.06 to $30.01 a share, and sold off to its current price of just under $29. If you're bullish on Hormel, I would wait until after it reports earnings and buy the stock if it breaks out above $30.06 to $30.37 on big volume. Look for volume that's tracking in close to or above its three-month average action of around 1.1 million shares. Volume on Monday was 1.4 million as the stock dropped 1.4% ahead of the quarter. I would target a spike of 10% or higher if HRL breaks out post-earnings since it will mean this stock has entered all-time high territory. Momentum traders will be all over this name if we get the breakout. I would only get short this stock after earnings are reported if it trades back below both its 50-day of $28.45 and 200-day of $28.17 on high volume. I would target a drop back towards the next significant support zones near $26.50 to $25 a share, or possibly even lower if the short-sellers take over this stock post-earnings. To see more potential earnings short squeeze plays, including Collective Brands (PSS), CNinsure (CISG) and Jack in the Box (JACK), check out the Earnings Short Squeeze Plays portfolio on Stockpickr. -- Written by Roberto Pedone in Winderemere, Fla.
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