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A potential earnings short-squeeze play in the basic materials complex is
Actuant(ATU - Get Report), which is set to release numbers on Wednesday before the market open. This company designs, manufactures and distributes a range of industrial products and systems. Wall Street analysts, on average, expect Actuant to report revenue of $368.50 million on earnings of 38 cents per share.
This company has beaten Wall Street estimates for the last three quarters in a row. Last quarter, Actuant reported a net income of 50 cents per share versus the mean estimate of 43 cents per share. The company has registered double-digit year-over-year percentage revenue growth for the past four quarters in a row. During that timeframe, its averaged growth of 32.8%, with the biggest growth reported in the four quarter of last year at 78.1%.
The current short interest as a percentage of the float for Actuant is rather high at 11.9%. That means that out of the 62.53 million shares in the tradable float, 7.45 million are sold short by the bears. If Actuant can manage to report another strong fundamental quarter of earnings growth, then this stock could easily put pressure on the bears that're currently short it.
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From a technical perspective, ATU is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the past six months, rising from a low of $17.77 to its current price of just over $29 a share. This strong uptrend has now pushed ATU within range of triggering a near-term breakout trade post-earnings.
If you're bullish on ATU, I would look for long biased trades after its earnings call if the stock manages to break out above some near-term overhead resistance at $29.50 a share with high-volume. Look for volume that's tracking in close to or above its three-month average volume of 703,141 shares. If we get that action, I would then add to any long positions once ATU takes out its 2011 high of $30.35 with volume.
I would simply avoid long-biased trades in ATU after earnings if this stock fails to break out over $29.50 a share, and then drops below some near-term support at $28 with volume. Target a drop back towards $27 to $25 a share if the bears whack this stock post-earnings.