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My first earnings short-squeeze trade idea is bookseller
Barnes & Noble(BKS - Get Report), which is set to report results on Tuesday before the market open. This company is a content, commerce and technology company that provides customers access to books, magazines, newspapers and other content across its multi-channel distribution platform. Wall Street analysts, on average, expect Barnes & Noble to report revenue of $1.48 billion on a loss of 93 cents per share.
Shares of Barnes & Noble spiked up 9.5% in premarket trading today on rumors that
Microsoft(MSFT) will be introducing a table with Xbox live streaming when the company holds a special event at 3:30 p.m. Microsoft has been rumored to be teaming up with Barnes & Noble for the innovative design. Maxim Research reiterated its buy rating on the stock with a $32 price target, on estimations that they will report $1.5 billion in revenues, up 11% year-over-year and EBITDA of $28 million.
The current short interest as a percentage of the float for Barnes & Noble is extremely high at 41.1%. That means that out of the 30.75 million shares in the tradable float, 15.45 million shares are sold short by the bears. If Barnes & Noble can manage to report a solid quarter and issue bullish guidance, then this stock could see a huge short-squeeze post-earnings.
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technical perspective, BKS is currently trading above its 200-day moving average and right at its 50-day moving average, which is neutral trendwise. This stock gapped up huge in May from around $14 to a high of $26 a share on massive upside volume. Following that gap, shares of BKS have downtrended from $26 to a recent low of $14.56 a share. During that sharp move lower, this stock has been making mostly lower highs and lower lows, which is bearish technical price action.
If you're in the bull camp on BKS, then I would wait until after it releases earnings and look for long-biased trades if this stock can manage
to trigger a near-term breakout above $16.55 to $17.52 a share with high-volume. Look for volume on that move that registers near or above its three-month average action of 2.1 million shares. If we get that move, then look for BKS to trade up towards its next significant overhead resistance levels at $19.50 to $21 a share post-earnings.
I would simply avoid BKS or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops below some near-term support at $14.56, and then its 200-day moving average of $13.77 a share with high volume. If we get that move, then BKS could hit $13 to $11 a share if the bears whack this stock lower post-earnings.