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My final earnings short-squeeze play today is communications equipment player
Oclaro(OCLR - Get Report), which is set to release numbers on Tuesday after the market close. This company is a provider of core optical network components, modules and subsystems to global telecommunications equipment manufacturers. Wall Street analysts, on average, expect Oclaro to report revenue of $105.73 million on a loss of 15 cents per share.
During the last quarter, Oclaro reported revenue of $88.7 million, but GAAP reported sales were 23% lower than the prior quarter's of $115.7 million. This stock has been beaten-down during the last six months, with shares plunging by over 35%. That sharp move lower could be setting up OCLR for a rebound and possibly short-squeeze trade post-earnings.
The current short interest as a percentage of the float for Oclaro is rather high 16.5%. That means that out of the 50.72 million shares in the tradable float, 8.42 million are sold short by the bears. This is a very high short interest on a stock with a relatively low float. Any bullish earnings news out of Oclaro and we could see a solid short-covering rally post-earnings.
From a technical perspective, OCLR is currently trading above its 50-day moving average, and below its 200-day moving average, which is neutral trendwise. This stock was destroyed by the sellers back in late March, when it fell from $4.97 to its May low of $2.11 a share. During that move, shares of OCLR were making lower highs and lower lows, which is bearish technical price action. That said, the stock has started to mark a bottom during that last three months as buyers have moved in at around $2.11 to $2.21 a share.
If you're bullish on OCLR, then I would wait until after they report earnings and look for long-biased trades if it can manage to trigger a breakout trade above some near-term overhead resistance at $2.83, and then above more resistance $3.10 to $3.15 a share with high volume. If we get that action, then OCLR will have a great chance of re-testing and possibly taking out its 200-day moving average at $3.42 a share.
I would simply avoid OCLR after earnings if this stock fails to trigger that breakout, and then moves back below its 50-day moving average of $2.61 a share, and more support at $2.47 a share with heavy volume. If we get that action, then OCLR will likely re-test those recent lows at $2.21 to $2.11 a share.
To see more potential earnings short squeeze plays, check out the
Earnings Short Squeeze Plays portfolio on Stockpickr.
-- Written by Roberto Pedone in Winderemere, Fla.