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My first earnings short-squeeze trade idea this week is biotechnology and drugs player
Theravance(THRX), which is set to report results on Tuesday after the market close. This company is focused on the discovery, development and commercialization of small molecule medicines across a number of therapeutic areas, including respiratory disease, bacterial infections, and central nervous system pain. Wall Street analysts, on average, expect Theravance to report revenue of $1.97 million on a loss of 44 cents per share.
If you're looking for a strong uptrending heavily-shorted biotechnology stock heading into its earnings report this week, then make sure to check out shares of Theravance. This stock has soared over 35% so far in 2012, and it's currently trading just two points off its 52-week high of $31.87 a share.
The current short interest as a percentage of the float for Theravance is extremely high at 16.2%. That means that out of the 47.33 million shares in the tradable float, 9.37 million shares are sold short by the bears. The short-sellers have also been increasing their bets from the last reporting period by 5.6%, or by about 499,000 shares. If Theravance can deliver bullish results, we could see a large short-squeeze develop since the bears are pressing their bets into the quarter.
>>22 Biopharma Stocks With Breakout Potential in 2012
technical perspective, THRX is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock
triggered a major breakout back in June, when it took out some past overhead resistance at $22.93 to $24.29 a share with massive volume. Since triggering that breakout, shares of THRX have soared to its
52-week high of $31.87 a share. That move has now pushed THRX within range of triggering a near-term breakout trade post-earnings.
If you're bullish on THRX, then I would wait until after earnings and look for long-biased trades if this stock can manage to trigger a break out above some near-term overhead resistance at $30.72 to $31.87 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 599,376 shares. If we get that action, then THRX will enter new 52-week-high territory, and the stock could easily trade north of $35 a share.
I would simply avoid THRX or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops below some major near-term support levels at $29.03 to $28 a share with high volume. If we get that action, then THRX could trend lower toward $25 to $24 a share if the bears hammer this stock down post-earnings.