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An earnings short-squeeze play in the food processing complex is
Zhongpin(HOGS), which is set to release numbers on Tuesday after the market close. This is a holding company, principally engaged in the meat and food processing and distribution business in the People's Republic of China. Wall Street analysts, on average, expect Zhongpin to report revenues of $410.30 million on earnings of 50 cents per share.
The current short interest as a percentage of the float for Zhongpin stands at 7.9%. That means that out of the 55.24 million shares in the tradable float, 14.87 million are sold short by the bears. This isn't a huge short interest, but it's more than enough to spike the stock off any bullish news.
From a technical perspective, HOGS is currently trading below its 50-day moving average and right at its 200-day moving average, which is neutral trendwise. This stock recently ran higher from $8.30 to a recent high of $12.50 a share. After hitting that high, the stock has started to form a bearish pattern of lower highs and lower lows, as shares fell from to its current price of $10.11 a share.
If you're bullish on HOGS, I would look for long-biased trades after its report if the stock can manage to move back above its 50-day moving average of $10.73 a share with high-volume. Look for volume that registers close to or above its three-month average action of 224,702 shares. If we get that action, I would target a run in HOGS back towards $11.86 to $12.50 a share in the near-term.
I would simply avoid HOGS or look for short-biased trades after its report if the stock fails to move back above the 50-day and then takes out its 200-day at $9.91 a share with volume. Target a drop back toward $8.50 a share or possibly lower if HOGS breaks those key moving averages post-earnings with volume.
To see more potential earnings short squeeze plays, including
Penson Worldwide(PNSN), check out the
Earnings Short Squeeze Plays portfolio on Stockpickr.
-- Written by Roberto Pedone in Winderemere, Fla.