5 Short-Squeeze Plays Set to Pop

J.C. Penney

My first earnings short-squeeze trade idea is department and discount store player J.C. Penney (JCP), which is set to release its numbers on Tuesday before the market open. This company's business consists of selling merchandise and services to consumers through its department stores and through its Internet Website at jcp.com. Wall Street analysts, on average, expect J.C. Penney to report revenues of $3.48 billion on a loss of 10 cents per share.

This company missed Wall Street estimates last quarter after beating estimates in the prior two quarters. J.C. Penney is looking snap a streak of three straight quarters of revenue declines. Revenue dropped 0.8% in the second quarter of the last fiscal year and 4.8% in the third quarter of the last fiscal year.

The current short interest as a percentage of the float for J.C. Penny is pretty high at 17.1%. That means that out of the 162.03 million shares in the tradable float, 33.30 million shares are sold short by the bears.

From a technical perspective, JCP is currently trading above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock sold off hard from its February high of $42.94 to its recent low of $32.45 a share. During the last month and change, shares of JCP have found buying interest around $33 to $32.50 a share.

If you're bullish on JCP, I would wait until after they report and look for long-biased trades if this stock can manage to move back above its 50-day moving average of $35.42 share with high volume. Look for volume on that move that registers near or above its three-month average action of 4,785,470 shares. If we get that action, then I would add to any JCP long positions once it takes out some near-term overheard resistance at $36.83 to $37.25 a share with high volume.

I would simply avoid JCP or look for short-biased trades if after earnings this stock fails to trade back above its 50-day moving average at $35.42, and then drops back below some near-term support at $32.45 a share with heavy volume. Target a move lower toward $30 to $29 a share if the bears hammer this stock down post-earnings.

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