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TheStreet Open House

5 Earnings Stocks Poised to Pop


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Another earnings short-squeeze idea is Quidel (QDEL), which is set to report results on Wednesday after the market close. This company is engaged in the development, manufacturing and marketing of diagnostic testing solutions. Wall Street analysts, on average, expect Quidel to report revenue of $36.85 million on earnings of 5 cents per share.

If you're looking for a beaten-down heavily shorted stock heading into earnings, then make sure to take a solid look at shares of Quidel. This stock has been destroyed by the sellers off its October high of $19.09 to a recent low of $14.15 a share. A surprise upside earnings report could easily spark a powerful snapback short covering rally in QDEL post-earnings.

The current short interest as a percentage of the float for Quidel is pretty high at 16.4%. That means that out of the 25.49 million shares in the tradable float, 4.62 million are sold short by the bears. This is a high short-interest/low-float stock, so if we get some positive price action after its report, it could short-squeeze big.

From a technical perspective, QDEL is now trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending from its October high of $19.09 to its current price of $14.50. During that slide lower, QDEL has consistently been making higher lows and lower lows. This means that large traders are dumping this stock at any chance they get. That said, QDEL has firmed up a big recently and found some buying support at around $14.08 to $14.15 a share.

If you're bullish on QDEL, I would wait until after it reports its results and look for long-biased trades as long as $14.08 isn't breached with high volume. If that level holds, I would then look for more upside if $15.24 and its 200-day moving average of $15.49 are taken out with volume. Look for volume on that move that hits near or well above its three-month average action of 184,608 shares. Target a move towards $16.20 or much higher if the bulls spark a solid short-squeeze post-earnings.

I would simply avoid any long trades in QDEL or look for short-biased trades if this stock takes out $14.08 with heavy volume after its report. If we get that action, target a drop back towards its next significant support zones at $13 to $12.35 a share, or possibly much lower if the bears sell this stock off hard post-earnings.

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