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My first earnings short-squeeze trade idea is construction services player
Titan Machinery(TITN - Get Report), set to report results on Thursday before the market open. This company owns and operates a network of agricultural and construction equipment stores in the U.S. and Europe. Wall Street analysts, on average, expect Titan Machinery to report revenues of $391.13 million on earnings of 38 cents per share.
On Monday, research analysts at M Partners reaffirmed their buy rating on Titan Machinery with a $42.50 price target. The analyst wrote, "The first 5 months of 2012, we have seen commodity prices trend upward towards previously set peak prices and we believe these historically high or peak commodity prices will carry through calendar 2012 which in turn should translate into another year of solid agricultural equipment sales for Titan."
The current short interest as a percentage of the float for Titan Machinery is rather high at 13.6%. That means that out of the 16.78 million shares in the tradable float, 2.30 million shares are sold short by the bears. This is a very high short interest on a stock with low float. If Titan Machinery can deliver the numbers that the bulls are looking for, then this stock could easily see a huge short-squeeze post-earnings.
From a technical perspective, TITN is currently trading above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock recently formed a double top at around $36.92 to $36.70 a share, and subsequently dropped back below its 50-day and down to a low of $28.33. After that drop, TITN has formed a near-term double bottom at $28.33 to $28.39 a share.
If you're in the bull camp on TITN, I would wait until after they release earnings and look for long-biased trades if this stock can hold that recent low of $28.33, and then break out back above its 50-day moving average of $31.82 a share with high-volume. Look for volume on that move that registers near or above its three-month average action of 492,361 shares. If we get that action, then TITN could easily spike big back toward its 52-week high of $36.92 a share post-earrings.
I would simply avoid TITN or look for short-biased trades if after earnings it fails to trigger that move back above its 50-day, and then drops below that near-terms support at $28.39 a share with high-volume. If we get that action, then TITN could slice below its 200-day moving average of $25.40 a share if the bears hammer this lower post-earnings.