An earnings short-squeeze play in the computer services complex is Yahoo! (YHOO), another of Rothbort's worst-run companies of 2011,which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Yahoo to report revenue of $1.19 billion on earnings of 24 cents per share.
Wall Street doesn't expect a great quarter out of Yahoo! this week, with analysts looking for a 7.7% drop in earnings from the same quarter last year. Revenue for Yahoo! has trended lower for the past four quarters. Revenue dropped by 24% in the third quarter, it fell 23.3% in the second quarter from a year ago, it dropped 24% in the first quarter from a year ago, and it dropped 11.9% in the fourth quarter of the last fiscal year.The current short interest as a percentage of the float for Yahoo! is notable at 3.3%. That means that out of the 1.05 billion shares in the tradable float, 36.65 million are sold short by the bears. This isn't a huge short interest, but it's more than enough spark a sharp move higher if Yahoo can deliver a strong quarter and raise guidance. From a technical standpoint, YHOO is currently trading above its 50-day and 200-day moving averages, which is bullish. This stock has been trading within a range for the past few months between $14.57 and $16.79 a share. A high-volume move outside of that range post-earnings should set this stock up for its next big trend. If you're bullish on YHOO, I would wait until after it reports itsearnings and buy some shares if the stock breaks out above $16.15 a share on high volume. Look for volume that's tracking in close to or above its three-month average action of 21.75 million shares. If we get that action, then I would add to any long positions once YHOO takes out $16.79 with volume. A high-volume move over $16.15 and $16.79 should set this stock up for a run back towards its 2011 high of $18.84 a share. I would avoid YHOO or get short this stock if it drops below its 200-day moving average of $15.24 on high-volume after their report. If we get that action, I would then add to any short positions once YHOO takes out $14.57 with volume. Target a drop back toward $13.11 a share, or possibly lower if the bears hammer this stock down post-earnings.
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