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An earnings short-squeeze candidate in the department and discount store complex is
Fred's(FRED - Get Report), which is set to release numbers on Thursday before the market open. This company is engaged in the sale of general merchandise through its retail discount stores and full-service pharmacies. Wall Street analysts, on average, expect Fred's to report revenue of $500.86 million on earnings of 27 cents per share.
If you're looking for a heavily shorted stock that's trading within range of triggering a major breakout trade post-earnings, then make sure to check out shares of Fred's ahead of its earnings report this week. During the last six months, shares of Fred's have trended up 17.6% and the stock is just one point off its 52-week high of $15.27 a share.
The current short interest as a percentage of the float for Fred's is very high at 16.6%. That means that out of the 34.17 million shares in the tradable float, 5.68 million are sold short by the bears. This stock could rip sharply higher post-earnings due to its low float and high short interest. All the bulls will need is for Fred's to report solid earnings and bullish forward guidance.
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From a technical perspective, FRED is currently trading above both its 50-day and 200-day moving averages, which is bullish. During the last four months, this stock has been trending sideways between $13.12 on the downside and $15.20 on the upside. A
high-volume move outside of that range post-earnings should set this stock up for its next major trend.
If you're in the bull camp on FRED, I would look for long-biased trades after they report if this stock manages to trigger a break out above some near-term overhead resistance at $15.20 a share with high-volume. Look for volume on that move that registers near or close to its three-month average action of 248,521 shares. If we get that move, then look for FRED to spike 15% or more post-earnings.
I would simply avoid FRED or look for short-biased trades if the stock fails to trigger that breakout, and then drops back below some near-term support at $14 to $13.75 a share with high-volume. Target a drop towards its 200-day moving average of $13.10 a share or possibly down to $12 a share if the bears spark a big-time selloff post-earnings.