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Another potential earnings short-squeeze play is technology player
Xyratex(XRTX), which is set to release its numbers on Thursday after the market close. This company is a provider of data storage technology, including modular solutions for the enterprise data storage industry and hard disk drive capital equipment for the HDD industry. Wall Street analysts, on average, expect Xyratex to report revenues of $327.03 million on earnings of 29 cents per share.
Last Tuesday, Cantor Fitzgerald started coverage on this stock with a hold rating and a price target of $12 a share. This stock has been beaten down hard heading into its quarterly report, since shares have dropped over 28% in the last three months.
The current short interest as a percentage of the float for Xyratex sits at 5.3%. That means that out of the 27.31 million shares in the tradable float, 1.45 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 43.9%, or by about 443,600 shares. If the shorts are caught pressing too hard into the recent sharp decline, then we could easily see a snapback short-covering rally for XRTX post-earnings.
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From a technical perspective, XRTX is currently trading below both its 50-day and 200-day
moving averages, which is bearish. This stock has been downtrending hard during the last four months, with shares dropping from its March high of $17.96 a share to its recent low of $10.52 a share. During that big move lower, shares of XRTX have been making lower highs and lower lows, which is bearish technical price action. That said, the stock has started to trend sideways during the last month and change, between $10.52 and $12.26 a share. A move outside of that range post-earnings will likely setup the next major trend for XRTX.
If you're in the bull camp on XRTX, then I would wait until after it reports numbers and look for long-biased trades if this stock can manage to take out some near-term overhead resistance at $12.26 a share with high-volume. Look for volume on that move that registers near or above its three-month average action of 349,702 shares. If we get that action, then XRTX could easily tag its 200-day at $13.87 or possibly some more overhead resistance at $14.94 post-earnings.
I would simply avoid XRTX or look for short-biased trades if after earnings this stock fails to trigger that breakout, and then takes out some major
near-term support at $10.63 to $10.52 a share with high volume. If we get that action, then XRTX could easily trade back toward $9 to $8 a share if the bears whack this stock lower post-earnings.