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An earnings short-squeeze play in the communications services complex is
Leap Wireless(LEAP), which is set to release numbers on Thursday after the market close. This company is a wireless communications carrier that offers digital wireless services in the U.S. under the Cricket brand. Wall Street analysts, on average, expect Leap Wireless to report revenue of $807.96 million on a loss of $1.11 per share.
This company missed Wall Street estimates for the last four quarters in a row. During the last quarter, Leap Wireless missed estimates by 10 cents, reporting a loss of 90 cents per share versus a mean estimate of a net loss of 80 cents per share. This company has registered double-digit year-over-year percentage revenue growth for the past four quarters. The average growth during that timeframe was 25.2%.
The current short interest as a percentage of the float for Leap Wireless is rather high at 12.8%. That means that out of the 48.80 million shares in the tradable float, 9.93 million are sold short by the bears. This is another low float stock with a decent short interest. Any good news that the bulls love could easily spark a big short-squeeze.
From a technical perspective, LEAP is currently trading above its 50-day moving average and just below its 200-day
moving average, which is neutral trendwise. This stock has uptrending strong during the last couple of months, rising from its low in October of $5.50 to its current price of just under $9.50 a share. That strong uptrend now sets up LEAP to trigger a big breakout post-earnings if the bulls get the news they're looking for.
If you're bullish on LEAP, I would look for long-biased trades after they report if the stock can manage to break out above $9.69 to $10.68 with high-volume. Look for volume that's tracking in close to or above its three-month average volume of 1,799,730 shares. If we get that action, I expect LEAP to spike 15% or more since there's little overhead resistance on the stock until $13 to $15 a share.
I would simply avoid LEAP or look for short-biased trades if after earnings this stock fails to break out and then takes out its 50-day moving average of $8.98 with volume. Target a drop back toward $8 to $7 a share if the bears hammer this lower post-earnings.