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My first earnings short-squeeze trade candidate is auto and truck parts player
Westport Innovations(WPRT - Get Report), which is set to report its numbers on Wednesday after the market close. This is a provider of engine and fuel system technologies utilizing gaseous fuels. Wall Street analysts, on average, expect Westport Innovations to report revenue of $58.34 million on a loss of 26 cents per share.
On Monday, Jefferies raised its price target on Westport Innovations from $45 to $55, noting that 2012 sales are on track to be $400 to $425 million, which is well above the firm's $300 million estimate. Jefferies said, "With more OEM partnerships and platforms likely, and order patterns improving, we raise our target $10 to $55."
The current short interest as a percentage of the float for Westport Innovations is extremely high at 17.1%. That means that out of the 35.62 million shares in the tradable float, 6.79 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by If the bears are caught leaning too strong into this quarter, then this stock could very easily short-squeeze big. The float for WPRT is very small and the short interest is big, so if the bulls get the news they're looking for, the stock will skyrocket.
From a technical perspective, WPRT is currently trading above both its 50-day and 200-day moving averages, which is bullish. That said, the stock recently hit a high of $47.38, and has since then turned sharply lower to $41 a share on massive volume. That massive selling volume is a cause for concern, but the stock has some big near-term support at around $38 a share.
If you're bullish on WPRT, I would look for long-biased trades following its report if the stock does not breach that near-term support zone at $38 with heavy volume. As long as that level holds, and at worst case its 50-day moving average of $37.42 holds, then I would be stalking this for long biased trades. I would get especially bullish if it breaks out above $44 to $45.22 a share after earnings with volume. Look for volume that's near of well above its three-month average action of 1,382,190 shares.
I would only look for short biased trades or avoid WPRT if after earnings the stock takes out those key support zones at $38 and at its 50-day moving average of $37.42 with big volume. If we get that action, I would target a drop back toward $34 to $32 a share, or possibly much lower if the bears continue to blast this stock lower post-earnings.
Westport is one of the
top holdings of George Soros, comprising 2.6% of the Soros Fund Management portfolio as of the most recently reported quarter. I also featured it earlier this month in "
8 Stocks Rising on Monster Volume."