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Another potential earnings short-squeeze trade in the oil and gas complex is
Solazyme(SZYM - Get Report), which is set to release numbers on Monday after the market close. This company's technology transforms a range of plant-based sugars into oils. Wall Street analysts, on average, expect Solazyme to report revenue of $10.48 million on a loss of 30 cents per share.
If you're looking for a beaten-down heavily-shorted stock heading into its earnings report, then make sure to check out shares of Solazyme. In just the last month, this stock has plunged from a high of $16.31 to a recent low of $9.40 a share. That move has pushed Solazyme into oversold territory since its current relative strength index (RSI) is 29.93.
The current short interest as a percentage of the float for Solazyme is extremely high at 20.6%. That means that out of the 34.70 million shares in the tradable float, 6.17 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 13.4%, or by about 727,000 shares. If the bears are caught leaning too strong into this quarter, then this heavily shorted stock could easily explode higher post-earnings.
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From a technical perspective, SZYM is currently trading below both its 50-day and 200-day
moving averages, which is bearish. This stock had been in a strong uptrend during the last six months, with shares soaring from a low of $10.14 to a recent high of $16.31 a share. That said, the stock sold off big in the last month pushing SZYM into oversold territory. Oversold can always get more oversold, but if we get any strength post-earnings, then SZYM could setup for a big short squeeze.
If you're in the bull camp on SZYM, then I would wait until after it reports and look for long-biased trades if this stock can trigger a break out above some near-term overhead
resistance at $10.23 a share with high volume. Look for volume on that move that hits close to or above its three-month average volume of 630,229 shares. If we get that move, then SZYM could easily hit its 200-day moving average of $12.53 or even $13 a share post-earnings.
I would avoid SZYM or look for short-biased trades if the stock fails to trigger that move, and then drops back below some near-term support at $9.40 a share with high-volume. Target a drop back towards its next significant previous support levels at $9 to $7.50 if the bears destroy this stock post-earnings.