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5 Short-Squeeze Plays Set to Pop

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Lifeway Foods

One earnings short-squeeze candidate is Lifeway Foods (LWAY), which is set to release numbers on Tuesday after the market close. This company is engaged in the manufacturing of probiotic, cultured, functional dairy and non-dairy health food products. Wall Street analysts, on average, expect Lifeway Foods to report revenue of $20.84 million on earnings of 6 cents per share.

The current short interest as a percentage of the float for Lifeway Foods is very high at 14.9%. That means that out of the 4.63 million shares in the tradable float, 686,000 are sold short by the bears. This is a decent short-interest on a stock with an extremely low float. If LWAY can manage to report a solid quarter and raise forward guidance, then this stock could see a power short-squeeze since the float is so small.

From a technical perspective, LWAY is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been trending lower for the past six months, with shares dropping from $11.24 to a recent low of $8.03 a share.

During that downtrend, shares of LWAY have consistently made lower highs and lower lows, which is bearish price action. Traders will need to look for a change in that trend post-earnings in order for LWAY to spike higher.

If you're bullish on LWAY, I would look for long-biased trades after they report if this stock manages to move back above its 50-day moving average of $8.81 a share with high-volume. Look for volume on that move that registers near or well above its three-month average action of 10,403 shares. If we get that action, then the trend could change to bullish for LWAY, and the stock could spike back toward its 200-day moving average of $9.68 a share.

I would simply avoid LWAY or look for short-biased trades if the stock fails to trigger that move, and then drops back below some near-term support at $8.03 a share with high-volume. Target a 15% or more fall in shares of LWAY if that $8.03 support zone gets taken out with volume post-earnings.

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