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My first earnings short-squeeze trade idea this week is biotechnology and drugs player
Theravance(THRX - Get Report), 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.