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Another earnings short-squeeze candidate is
Lululemon Athletica(LULU - Get Report), which is set to release numbers on Thursday before the market open. This is a designer and retailer of technical athletic apparel operating primarily in North America and Australia. Wall Street analysts, on average, expect Lululemon Athletica to report revenue of $362.37 million on earnings of 49 cents per share.
On Tuesday Jefferies said it would not be surprised to see Lululemon Athletica create more beatable 2012 expectations after it reports fourth quarter earnings. The firm thinks management guidance will create some near-term weakness in the stock, but expects the pullback to be brief. As we approach its quarter, shares of Lululemon Athletica are trading just a few points off its
52-week high of $74.50.
The current short interest as a percentage of the float for Lululemon Athletica is pretty high at 12%. That means that out of the 99.03 million shares in the tradable float, 11.79 million are sold short by the bears. Since this stock is trading so close to its 52-week high, any bullish earnings news could easily spark a big short squeeze.
From a technical perspective, LULU is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong since it bottomed last December at around $41.70 to $42.75 a share. After marking that bottom, the stock has soared towards its current price of just under $73 a share. This strong uptrend how puts LULU within range of triggering a big breakout post-earnings.
If you're bullish on LULU, I would wait until after it reports earnings and look for long-biased trades if the stock breaks out above its 52-week high of $74.50 a share with heavy volume. Look for volume that's tracking in close to or above its three-month average action of 2,301,720 shares. If we get that action, then look for LULU to march towards $80 or higher pretty quickly.
I would avoid LULU or look for short-biased trades if the stock fails to break out over $74.50, and then drops below some near-term support at $71.50 a share with volume. Target a drop back towards its 50-day moving average of $65.72 a share, or possibly much lower if the bears sell this stock off hard post-earnings.
Lululemon shows up on a recent list of
10 Best-Performing Stocks in Three-Year Bull Market.