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My first earnings short-squeeze trade idea is semiconductor player
RF Micro Devices(RFMD), which is set to release its numbers on Tuesday after the market close. Wall Street analysts, on average, expect RF Micro Devices to report revenue of $225.04 million on earnings of 3 cents per share.
During the last quarter, RF Micro Devices beat Wall Street estimates by 1 cent. The company has seen its income trend lower year over year by an average of 22.5% over the past five quarters. Revenue has trended down for the past three quarters.
The current short interest as a percentage of the float for RF Micro Devices is pretty high at 9.4%. That means that out of the 271.27 million shares in the tradable float, 25.62 million shares are sold short by the bears.
From a technical standpoint, RFMD is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been stuck in a nasty downtrend for the past couple of months. During that downtrend, the stock has dropped from $7.89 in October to a recent low of $4.41 a share. That recent low came on a large gap down in price on heavy volume. Shares of RFMD have started to rally a bit from that gap down to its current price of just under $5 a share.
If you're bullish on RFMD, I would get long after they report their earnings if the stock breaks out above some near-term overhead resistance at $5.17 a share on high-volume. Look for volume that's tracking in close to or above its three-month action of 7,524,560 shares. If we get that action, I would then look for RFMD to take out its 50-day moving average of $5.61 and re-test its 200-day moving average of $6.10, or possibly hit $6.50 a share.
I would avoid this stock completely from the long side If RFMD fails to break out over $5.17 a share with volume after its earnings report. A failure to break out should set this stock up to re-test that recent low of $4.41 and blow right through it. If RFMD losses $4.41 with volume post-earnings, then this stock could easily trade back toward its next major support zone at $3.65 a share.
As of the most recently reported period, RF Micro is one of the
top holdings at Discovery Capital Management.