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One possible earnings short-squeeze trade in the specialty retail complex is
PriceSmart(PSMT - Get Report), which is set to release numbers on next Monday after the market close. This company consists primarily of international membership shopping warehouse clubs similar to warehouse clubs in the U.S. Wall Street analysts, on average, expect PriceSmart to report revenue of $510.68 million on earnings of 60 cents per share.
This stock has been trading pretty flat on the year, with shares only down by 3.3% so far in 2012. Back on June 23, Roth Capital initiated coverage on this stock with a neutral rating. During the last quarter, PriceSmart missed Wall Street earnings estimates, after reporting earnings of 67 cents per share vs. estimates of 69 cents per share. The company's revenue for the quarter was up 22.3% on a year-over-year basis.
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The current short interest as a percentage of the float for PriceSmart is pretty high at 12%. That means that out of the 21.18 million shares in the tradable float, 2.22 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 6.4%, or by about 134,000 shares. This stock has a very low float and a rather high short interest. If PriceSmart can deliver the numbers the bulls are looking for, then we could easily see a big short-squeeze kickoff post-earnings.
technical perspective, PSMT is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been hammered by the bears during the last two months, with shares dropping from its May high of $84.32 to a recent low of $61.15 a share. During that sharp move lower, shares of PSMT have consistently made lower highs and lower lows, which is bearish technical price action. That said, shares of PSMT have started to form a double bottom at $61.15 to $62.10 a share. This stock has now bounced off that bottom and it's now trading within range of a near-term breakout trade.
If you're bullish on PSMT, then I would wait until after they report and look for long-biased trades if this stock can manage to trigger a break out above some near-term overhead resistance at $69.21 a share, and then above its 50-day moving average of $71 a share with
high volume. Look for volume on that move that hits near or above its three-month average volume of 304,805 shares. If we get that action, then PSMT could easily spike higher towards its next significant overhead
resistance level at $79 a share.
I would avoid PSMT or look for short-biased trades if after earnings it fails to
trigger that breakout and then drops below some near-term support at $65 a share with high volume. If we get that move, then look for PSMT to re-test and possibly take out those double bottom zones near $62.10 to $61.15 a share.