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My final earnings short-squeeze candidate is food processing player
Hormel Foods(HRL - Get Report), 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
Jack in the Box(JACK), check out the
Earnings Short Squeeze Plays portfolio on Stockpickr.
-- Written by Roberto Pedone in Winderemere, Fla.