My first earnings short-squeeze play is grocery retailer Supervalu (SVU - Get Report), one of the highest-yielding retail stocks, which is set to report its results on Wednesday before the market open. Wall Street analysts, on average, expect Supervalu to report revenue of $8.42 billion on earnings of 24 cents per share.
This company has been implementing a turnaround plan, closing stores and selling some of its business segments. Due to this change in operations, Supervalu could surprise to the upside if they were able to increase sales and keep costs under control as they righted the ship.The current short interest as a percentage of the float for Supervalu is extremely high at 24.5%. That means that out of the 212.23 million shares in the tradable float, 51.44 million are sold short by the bears. This is a stock with a monster short interest, so any bullish news and forward guidance could easily set this stock off on a large spike higher. From a technical standpoint, SVU is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock recently broke above its 200-day moving average of $8.33 a share on decent volume. The stock is now approaching some key breakout levels that could get taken out to the upside post-earnings. If you're bullish on SVU, I would get long after it reports earnings if the stock can manage to break out above $8.57 and $8.65 with volume. Look for volume that's tracking in close to or above its three-month average action of 203,024 shares. If we get that action, then target a run back toward $9.50 to $10 a share or possibly higher if the bulls push this higher post-earnings. I would get short SVU after earnings if the stock drops below $8 and then $7.75 a share (its 50-day) with heavy volume. A high-volume drop below those levels should set this stock up to re-test $7 to $6.88 a share post-earnings.
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