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5 Earnings Stocks Poised to Pop

Rue21

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My final earnings short-squeeze play today is specialty apparel retailer Rue21 (RUE), which is set to release numbers on Thursday after the market close. This company provides fashion apparel and accessories for girls and guys, including graphic T-shirts, denim, dresses, shirts, hoodies, belts, jewelry, handbags, footwear, intimate apparel, and other accessories. Wall Street analysts, on average, expect Rue21 to report revenue of $204.10 million on earnings of 43 cents per share.

If you're looking for a strong uptrending and heavily shorted stock heading into its earnings report this week, then make sure to check out shares of Rue21. This stock has been blazing a path on the upside so far in 2012, with shares up over 26%.

The current short interest as a percentage of the float for Rue21 is extremely high at 27.1%. That means that out of the 16.07 million shares in the tradable float, 14.20 million are sold short by the bears. This is a huge short interest on a stock with a very low float. If Rue21 can deliver the results the bulls are looking for, then this stock could easily see a monster short-squeeze post-earnings.

From a technical perspective, RUE is currently trading below its 50-day moving average and above its 200-day moving average, which is neutral trendwise. This stock has been uptrending strong for the past six months, with shares exploding higher from a low of $19.69 to a recent high of $31.97 a share. During that uptrend, shares of RUE have consistently made higher lows and higher highs, which is bullish technical price action. That said, this stock just sold off at the start of May back below its 50-day moving average on heavy volume.

If you're bullish on RUE, I would wait until after its report and look for long-biased trades if this stock can manage to trigger a near-term break out above its 50-day at $28.82, and above some near-term overhead resistance at $28.97 a share with high-volume. Look for volume on that move that hits near or well above its three-month average volume of 297,038 shares. If we get that action, then RUE could easily re-test its recent high of $31.97 a share, or possibly hit its next major resistance area at $34 a share.

I would simply avoid RUE or look for short-biased trades if it fails to trigger that move, and then drops below some near-term support at $26.56 a share, and then under its 200-day moving average of $25.84 a share with high-volume. If we get that action, then look for RUE to drop sharply back toward $24 to $22 a share or possibly lower if the bears smack this stock down post-earnings.

To see more potential earnings short squeeze plays, check out the Earnings Short Squeeze Plays portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.

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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.
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