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Another potential earnings short-squeeze trade is
Groupon(GRPN - Get Report), which is set to report results on Monday after the market close. This company is a local e-commerce marketplace that connects merchants to consumers by offering goods and services at a discount. Wall Street analysts, on average, expect Groupon to report revenue of $530.58 million on earnings of 1 cent per share.
If you're looking for a beaten-down heavily-shorted stock ahead of its earnings report, then make sure to take a strong look at shares of Groupon. This stock has been destroyed by the bears during the last six months with shares dropping over 45%. Shares of Groupon are bouncing sharply today in front of its earnings report with the stock up 10% to $10.90, but that move is just a point off its 52-week low of $9.63 a share.
The current short interest as a percentage of the float for Groupon is high at 8.3%. That means that out of the 227.25 million shares in the tradable float, 17.43 million shares are sold short by the bears.
From a technical perspective, GRPN is currently trading below its 50-day moving average, which is bearish. This stock has been stuck in a nasty downtrend since February, with shares dropping from $25.84 to a low of $9.63 a share. For almost the last two months, this stock has been trending in oversold territory since its relative strength index reading for that period has been under 30. This oversold reading could be setting up GRPN for a sharp move higher post-earnings.
If you're bullish on GRPN, I would wait until after they release earnings and target long-biased trades if this stock can manage to break out above some near-term oversold resistance at $12.23 a share with high-volume. Look for volume on that move that's close to or well above its three-month average volume of 2,449,950 shares. If we get that move, look for GRPN to easily tag its 50-day moving average of $14.22 a share or possibly trade much higher.
I would simply avoid GRPN or look for short-biased trades if after earnings that breakout fails to hit, and then the stock takes out its 52-week low of $9.63 with high-volume. If we get that move, then target a drop of 15% or more if the bears continue to pound this stock lower post-earnings.