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5 Earnings Stocks Poised to Pop

Heico

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One final earnings short-squeeze idea play is aerospace and defense player Heico (HEI - Get Report), one of TheStreet Ratings' top-rated aerospace and defense stocks, which is set to release its numbers on Thursday after the market close. Wall Street analysts, on average, expect Heico to report revenues of $192.69 million.

If you're looking for a strong uptrending stock ahead of the quarter, then take a strong look at shares of Heico. This stock has returned over 40% so far in 2011, and its currently trading just three points off of its 52-week high of $60.94 a share.

The current short interest as a percentage of the float Heico is very high at 29.1%. That means that out of the 33.61 million shares in the tradable float, 3.37 million are sold short by the bears. This is a huge short interest on a stock with a reasonably low float. Any bullish earnings news should set this stock off for a monster short-squeeze.

From a technical standpoint, HEI is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock hit a low in October at $45.18 a share, and since then, it has been uptrending strong making mostly higher highs and higher lows. Now HEI is setting up for a big breakout post-earnings if the company can report earnings that the bulls love.

If you're bullish on HEI, I would wait until after its report and buy the stock as long as it stays above its 50-day moving average of $56.42 a share. If that level holds, I would then add aggressively once HEI triggers a major breakout above $60.50 to $60.94 on heavy volume. Look for volume that registers close to or above its three-month average action of 195,625 shares.

I would short or avoid HEI after its earnings report only if the stock drops back below its 50-day of $56.42 on heavy volume. If that level is taken out post-earnings, then target a drop back towards the 200-day moving average of $51.79 a share, or possibly even lower if the bears gain control of this stock.

To see more potential earnings short squeeze candidates, including Quiksilver (ZQK), PURE Bioscience (PURE) and Imperial Sugar (IPSU), check out the Earnings Short Squeeze Plays portfolio on Stockpickr.

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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.
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