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An earnings short-squeeze trade idea in the retail grocery sector is
Krispy Kreme Doughnuts(KKD - Get Report), which is set to report results on Tuesday after the market close. This company is a retailer and wholesaler of doughnuts and packaged sweets. Wall Street analysts, on average, expect Krispy Kreme to report revenue of $101.29 million on earnings of 6 cents per share.
Krispy Kreme Doughnuts' revenue has trended higher in each of the last four quarters. Revenue jumped 11.4% in the second quarter from the year earlier, rising 13.6% in the first quarter from last year and 5.7% in the fourth quarter vs. the year-ago period.
The current short interest as a percentage of the float for Krispy Kreme Doughnuts stands at 5.8%. That means that out of the 50.91 million shares in the tradable float, 2.97 million are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 17.9%, or by about 450,000 shares.
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From a technical perspective, KKD is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock recently found some buying interest right around its 200-day moving average of $7.77. Since buyers stepped in at that level, the stock has risen to its current price of around $8.30. That move has pushed KKD within range of
triggering a big breakout post-earnings.
If you're bullish on KKD, I would look for long-biased trades after its earnings report if the stock manages to break out above some near-term overhead
resistance at $8.55 to $8.77 a share with high volume. Look for upside volume that's near or well above its three-month average action of 498,652 shares. If we get that action, then look for KKD to make a run at $9.50 to $10 a share or possibly much higher if the bulls spark a short covering rally post-earnings.
I would simply avoid KKD or look for short-biased trades if after earnings this stock fails to break out over $8.55 to $8.77 a share, and then drops back below its 200-day moving average of $7.77 with volume. If we get that action, I would look for a drop back toward $7 to $6.80 a share or possibly lower if the bears slam this stock down post-earnings.