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My final earnings short-squeeze trade is
SkullCandy(SKUL - Get Report), which is set to release numbers on Wednesday after the market close. This company develops and distributes headphones and other audio accessories to retailers throughout the U.S. and to distributors in various countries worldwide. Wall Street analysts, on average, expect SkullCandy to report revenue of $82.51 million on earnings of 43 cents per share.
The current short interest as a percentage of the float for SkullCandy is extremely high at 45.4%. That means that out of the 15.03 million shares in the tradable float, 6.31 million shares are sold short by the bears. This is an incredibly high short interest for a stock with a very low float. Any bullish earnings news should easily set this stock off on a monster short squeeze, if the bulls like what they year.
From a technical perspective, SKUL is currently trading above its 50-day moving average, which is bullish. This stock formed a major bottom a few months ago at around $11.79 to $11.87 a share. After finding massive buying support at those levels, the stock took off and traded higher towards its current price of just above $15 a share. This big run now puts the stock within range of breaking out post-earnings.
If you're bullish on SKUL, I would wait until after it reports earnings and look for long biased trades if it breaks out above $15.75 a share with high volume. Look for volume that's tracking in close to or above its three-month average volume of 423,056 shares. If we get that action, I would then add to any long positions once SKUL takes out more overhead resistance at $16.24 a share. Target a run towards $17.50 to $19.75 a share if the bulls gain control of this stock post-earnings.
I would simply avoid SKUL or look for short-biased trades if it fails to break out above $15.75 post-earnings, and then drops below some near-term support at $14.68 on heavy volume. If we get that action, target a drop back towards its 50-day moving average of $13.49 a share, or much lower if the bears hammer this post-earnings.
I also featured SkullCandy recently in "
8 Stocks Rising on Huge Volume."
To see more potential earnings short squeeze plays, including
MercadoLibre(MELI), check out the
Earnings Short Squeeze Plays portfolio on Stockpickr.
-- Written by Roberto Pedone in Winderemere, Fla.