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Another potential earnings short-squeeze trade is 3D motion picture technology player
RealD(RLD - Get Report), which is set to report results on Wednesday after the market close. This company is a global licensor of 3D technologies. This company licenses its RealD Cinema Systems to motion picture exhibitors that show 3D motion pictures and alternative 3D content. Wall Street analysts, on average, expect RealD to report revenue of $46.98 million on a loss of 7 cents per share.
This company has topped Wall Street estimates for the last four quarters and its coming off a quarter where it beat estimates by 11 cents, after reporting a profit of 5 cents per share vs. forecasts of a net loss of 6 cents per share. During the third quarter, RealD swung to a profit of $2.8 million or 5 cents per share vs. a loss of $16.6 million or 34 cents per share from a year earlier. Revenue dropped 15.2% to $49 million from $57.8 million in the same quarter a year ago.
The current short interest as a percentage of the float for RealD is pretty high at 12.2%. That means that out of the 43.96 million shares in the tradable float, 5.31 million shares are sold short by the bears. This is more than enough shorts on a stock with a reasonably low float to spark a sizeable short-squeeze post-earnings, if RealD can deliver the numbers the bulls are looking for.
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From a technical perspective, RLD is currently trading above its 200-day
moving average, and just a few cents below its 50-day moving average, which is neutral trendwise. This stock recently bounced hard off its 200-day moving average of $11.05 with above average volume. That bounce has now pushed RLD within range of triggering a major breakout trade post-earnings.
If you're bullish on RLD, I would wait until after it releases earnings and look for long-biased trades if this stock can trigger a break out above its 50-day moving average of $11.94, and then above some near-term overhead resistance at $12.20 to $12.59 a share with high-volume. Look for volume on that move that hits close to or above its three-month average volume of 389,533 shares. If we get that action, then look for RLD to re-test and potentially take out its March high of $13.55 a share.
I would simply avoid RLD or look for short-biased trades if after earnings it fails to sustain a trend back above its 50-day at $11.94, and then drops below some major near-term support at $10.61 a share with high-volume. If we get that action, then RLD could easily drop down towards $9.50 to $8 a share if the bears spark a large selloff post-earnings.