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One potential earnings short-squeeze trade is television and movie streaming player
Netflix(NFLX - Get Report), which is set to release numbers on Tuesday after the market close. This company is an Internet subscription service streaming television shows and movies. Netflix's subscribers can watch unlimited television shows and movies streamed over the Internet to their televisions, computers and mobile devices. Wall Street analysts, on average, expect Netflix to report revenue of $888.90 million on earnings of 5 cents per share.
If you're looking for beaten-down heavily shorted stock ahead of its earnings report this week, then make sure to check out shares of Netflix. This stock has been hammered by the sellers during the last three months, with the stock dropping over 20%. It was one of the
10 Worst-Performing S&P 500 Stocks in the Second Quarter.
>>5 Big Stocks Ready to Slingshot Higher
The current short interest as a percentage of the float for Netflix is extremely high at 23.6%. That means that out of the 54.18 million shares in the tradable float, 12.7 million shares are sold short by the bears. If Netflix can manage to deliver the numbers the bulls are looking for, then we could easily see a monster-squeeze setup post-earnings.
From a technical perspective, NFLX is currently trading above both its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock recently formed a double bottom chart pattern at around $60.70 to $61.02 a share. Since marking that bottom, shares of NFLX have ripped back above its 50-day moving average with heavy volume, and hit a recent high of $86.65 a share.
If you're in the bull camp on NFLX, then I would look for long-biased trades after earnings if this stock manages to break out above some near-term overhead resistance at $86.65, and then above its 200-day moving average of $90.51 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 5,151,740 shares. If we get that move, then NFLX could easily re-test its next major overhead resistance level at $109.71 a share, or possibly trade even higher.
I would simply avoid NFLX or look for short-biased trades after earnings the stock fails to trigger that breakout, and then moves back below its 50-day moving average of $71.79 a share with high volume. If we get that action, then NFLX could re-test that double bottom area near $60 a share, or possibly trade even lower if the bears destroy this stock post-earrings.
Netflix also shows up on recent lists of
3 Stocks to Sell if They Crash on Earnings and
6 Sucker Stocks to Avoid at All Costs.