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Another potential earnings short-squeeze trade is network access solutions provider
Aruba Networks(ARUN), which is set to report results on Thursday after the market close. Wall Street analysts, on average, expect Aruba Networks to report revenue of $125.19 million on earnings of 15 cents per share.
If you're looking for a heavily shorted stock that's trading within range of a significant breakout as we head into their quarterly earnings report, then make sure to take a strong look at shares of Aruba Networks.
The current short interest as a percentage of the float for Aruba Networks is very high at 21.4%. That means that out of the 100.38 million shares in the tradable float, 20.88 million are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 10.6%, or by about 2 million shares. If the bears are caught pressing their bets into this quarter, then ARUN could easily explode higher since the short interest is so large.
From a technical perspective, ARUN is currently trading above its 50-day and 200-day moving averages, which is bullish. The recent found some big buying interest at around $17.20 a share, and since then it has soared to its current price of just under $24 a share. This large up move now puts ARUN with range of breaking out off a solid earnings report.
If you're bullish on ARUN, I would look for long-biased trades after it reports if the stock breaks out above $25 to $25.55 a share on strong volume. Look for volume that's tracking in close to or above its three-month average action of 2.5 million shares. If we get that
high-volume breakout, then I would look for ARUN to trade back towards $32 to $34 a share if the bulls gain full control of this stock post-earnings.
I would simply avoid ARUN or look for short-biased trades if this stock fails to breakout after earnings and then drops below its 200-day moving average of $23.33 with heavy volume. If we get that action, then I would target a drop back towards the 50-day moving average of $20.87 a share if the bears whack this lower post-earnings.
Aruba shows up on a lsit of
7 UBS Stock Picks for 2012.