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Another potential earnings short-squeeze trade is bed manufacturer and retailer
Select Comfort(SCSS - Get Report), which is set to report results on Wednesday after the market close. Wall Street analysts, on average, expect Select Comfort to report revenues of $177.50 million on earnings of 22 cents per share.
Back on Dec. 20, I wrote about Select Comfort in "
5 Stocks Setting Up to Break Out," and since then, the stock has ripped higher from $21 to its recent
52-week high of $28.05 a share. That momentum could easily continue if Select Comfort can report a strong quarter and squeeze the shorts even more.
The current short interest as a percentage of the float for Select Comfort is rather high at 10.9%. That means that out of the 50.44 million shares in the tradable float, 5.55 million are sold short by the bears. This stock has a pretty low float and high short interest, so a decent quarter should spark a sizable short-squeeze. Whenever a stock has a low float and high short interest, any potential short-squeeze becomes amplified since the supply and demand issue for shares can be thrown off balanced rapidly.
From a technical perspective, SCSS is currently trading above its 50-day and 200-day
moving averages, which is bullish. This stock has been in a monster uptrend for the last number of months, after shares found big buying support at around $17.78 to $18.58 a share. Since those buyers stepped in, SCSS went on to break out over $22.19 and continue its uptrend. Now the stock is within range of breaking out again to all-time highs if it can take out $28.05 post-earnings.
If you're bullish on SCSS, I would wait until after it reports its results and buy the stock once it breaks out above its 52-week high of $28.05 a share on strong volume. Look for volume that's tracking in close to or above its three-month average action of around 1 million shares. If we get that
high-volume breakout, then I would look for a 10% to 15% move higher in SCSS post-earnings, since this stock is so heavily shorted.
I would simply avoid any long trades in SCSS or get short if this stock fails to take out its 52-week highs post-earnings, and then drops below some near-term support at $25 a share on big volume. If we get that action, then I would target a drop back towards $23 to $22.16 (50-day) a share, or possibly lower if the bears hammer this down post-earnings.
To see more potential earnings short squeeze plays, including
Silicon Graphics(SGI), check out the
Earnings Short Squeeze Plays portfolio on Stockpickr.
-- Written by Roberto Pedone in Winderemere, Fla.