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5 Earnings Short-Squeeze Trades

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GATX

My final earnings short-squeeze candidate is transportation player GATX (GMT), which is set to release numbers on Thursday before the market open. This company leases, operates and manages assets in the rail, marine and industrial equipment markets. Wall Street analysts, on average, expect GATX to report earnings of 55 cents per share on revenue of $332.85 million.

If you're looking for a stock that's getting very close to triggering a big breakout off earnings, then take a strong look at shares of GATX. Over the past three months, this stock has been in a monster uptrend with shares up over 31%. Now the stock is approaching a breakout trade if the bulls get the news they're looking for.

The current short interest as a percentage of the float for GATX is worth mentioning at 6.4%. That means that out of the 46.22 million shares in the tradable float, 2.95 million shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a sharp rally if GATX can deliver bullish earnings and guidance.

From a technical standpoint, GMT is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has run up from its October low of $28.70 to its current price of around $44.50. This strong uptrend now sets up GMT for a breakout trade if it can manage to move above some near-term overhead resistance levels.

If you're bullish on GMT, I would wait until after they report earnings and buy some shares if it breaks out above $45.14 a share on big volume. Look for volume that's tracking in close to or above its three-month average action of 306,923 shares. If we get that high-volume breakout, then look for GMT to spike 10% to 15% higher post-earnings.

I would only get short this stock after earnings if it trades back below some near-term support at $42.01 with high-volume. If we get that move, I would then add to any short positions if the stock takes out its 50-day moving average of $41.60 a share with volume. Target a drop back toward $38 or the 200-day moving average of $37.45 a share.

To see more potential earnings short squeeze plays like Xilinx (XLNX), Ezcorp (EZPW) and Fastenal (FAST), check out the Earnings Short Squeeze Plays portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.

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Follow Stockpickr on Twitter and become a fan on Facebook. 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.

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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