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One potential earnings short-squeeze trade in the biotechnology and drugs complex is
Auxilium Pharmaceuticals(AUXL), which is set to release numbers on Tuesday before the market open. This company is focused on developing and marketing products to predominantly specialist audiences. Wall Street analysts, on average, expect Auxilium Pharmaceuticals to report revenue of $73.97 million on a loss of 6 cents per share.
Another strong uptrending and heavily-shorted biotechnology stock to put on your trading radar this week heading into its earnings report is shares of Auxilium Pharmaceuticals. This stock is up over 30% so far in 2012, and it's currently trading around two points off its
52-week high of $27.89 a share.
The current short interest as a percentage of the float for Auxilium Pharmaceuticals is notable at 8.6%. That means that out of the 37.69 million shares in the tradable float, 4.09 million shares are sold short by the bears. This is a decent amount of bears involved in a stock with a relatively small float. Any bullish earnings news out of Auxilium and we could easily see a solid short-squeeze develop post-earnings.
technical perspective, AUXL is currently trading above its 50-day and 200-day moving averages, which is bullish. This stock triggered a major breakout in June once it took out some overhead resistance at $19.63 to $21.25 a share with monster volume. Following that breakout, shares of AUXL skyrocketed to its recent 52-week high of $27.89 a share. That move has now pushed the stock within range of triggering a near-term breakout trade post-earnings.
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If you're bullish on AUXL, then I would wait until after they report and look for long-biased trades if this stock can manage to break out above some near-term overhead resistance at $26.95 to $27.25 a share, and then its 52-week high of $27.89 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 695,379 shares. If we get that move, then look for AUXL to trade north of $30 a share if the bulls gain full control of this stock post-earnings.
I would avoid AUXL 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 $25.45 to $25.42 a share, and then its 50-day moving average of $23.94 a share with heavy volume. If we get that action, then AUXL could easily trade down towards $21 a share, or possibly lower if bears whack this stock down post-earnings.