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Another possible earnings short-squeeze trade is biotechnology and drugs player
Cubist Pharmaceuticals(CBST), which is set to release its numbers on Thursday after the market close. This company is focused on the research, development and commercialization of therapies to treat serious medical conditions in acutely ill patients who are hospitalized or are being treated in other acute care settings. Wall Street analysts, on average, expect Cubist Pharmaceuticals to report revenue of $225.47 million on earnings of 46 cents per share.
Last week, Jefferies issues some comments on Cubist saying that the market has been pricing in little to no value for its Phase 3 drug candidates. Jefferies also said it views the current valuation for Cubist as attractive, and kept its buy rating on the stock with a $50 price target.
The current short interest as a percentage of the float for Cubist Pharmaceuticals is very high at 15.1%. That means that out of the 63.04 million shares in the tradable float, 9.52 million shares are sold short by the bears. This is the type of short interest that can produce explosive moves higher on a stock if the company can deliver what the bulls are looking for.
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From a technical perspective, CBST is currently trading above both its 50-day and 200-day
moving averages, which is bullish. This stock had been downtrending hard for the last four months, with shares falling from a high of $44.95 to a recent low of $36.73 a share. During that downtrend, shares of CBST have been making mostly lower highs and lower lows, which is bearish technical price action. That said, this stock has started to lift off that low of $36.73 a share and rip back above both its 50-day and 200-day moving averages.
If you're in the bull camp on CBST, then I would wait until after they report earnings and look for long-biased trades
if this stock triggers a near-term breakout trade above some overhead resistance levels at $41.67 to $43 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 810,070 shares. If we get that move, then CBST will have a great chance of re-testing and possibly taking out its next significant overhead resistance levels at $44 to $44.95 a share. A move over $44.95 would be very bullish since it will mean CBST has entered new
I would simply avoid CBST or look for short-biased trades if after earnings this stock fails to trigger that breakout, and then moves back below its 50-day at $40.21 and its 200-day at $39.98 a share with heavy volume. If we get that move, then CBST could get sold off by the bears all the way down to its recent low of $36.73 a share, or possibly even lower to $34.50 to $33.43 a share.