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One potential earnings short-squeeze trade in the software complex is
Adobe Systems(ADBE - Get Report), which is set to release numbers on Tuesday after the market close. This company offers a line of software and services used by creative professionals, marketers, knowledge workers, application developers, enterprises, and consumers. Wall Street analysts, on average, expect Adobe Systems to report revenue of $1.11 billion on earnings of 59 cents per share.
During the last quarter, Adobe Systems missed Wall Street estimates by 2 cents, reporting a profit of 42 cents per share vs. estimates of 46 cents per share. This company beat Wall Street estimates in the fourth quarter of the last fiscal year. Adobe Systems is looking to register its fifth-straight quarter of revenue increases. The company is also trying to rebound from profit declines in the last three quarters.
The current short interest as a percentage of the float for Adobe Systems sits at 3.3%. That means that out of the 463.56 million shares in the tradable float, 16.14 million shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a decent short-cover rally post-earnings if the bulls get the news their looking for.
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From a technical perspective, ADBE is currently trading above its 200-day moving average and just above its 50-day moving average, which is bullish. This stock recently traded down and tested its 200-day moving average of $29.94 a share, and has since then rebounded to trade just above its 50-day. This move is pushing ADBE within range of triggering a near-term
If you're bullish on ADBE, I would look for long-biased trades if after earnings it triggers a near-term breakout above some overhead
resistance at $32.85 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 4 million shares. If we get that action, then ADBE could easily re-test and take out its next significant overhead resistance levels at $34.09 to $34.78 a share.
I would simply avoid ADBE or look for short-biased trades after earnings the stock fails to trigger that breakout, and then moves below some near-term support at $31 a share with high volume. If we get that action, then ADBE could re-test and possibly take out its next significant support level at $29.81 a share post-earnings.