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My final earnings short-squeeze trade idea today is biotechnology and drugs player
Incyte(INCY - Get Report), which is set to release numbers on Thursday before the market open. This company is focused on the discovery, development and commercialization of small molecule drugs to treat serious unmet medical needs. Wall Street analysts, on average, expect Incyte to report revenue of $84.56 million on earnings of zero cents per share.
If you're looking for an extremely strong trending heavily-shorted biotech stock ahead of its earnings report this week, then make sure to take a close look at shares of Incyte. This stock has been skyrocketing so far in 2012 with shares up around 70%, and this stock is currently trading just one point off its
52-week high of $26.30 a share.
The current short interest as a percentage of the float for Incyte is pretty high at 12.7%. That means that out of the 128.10 million shares in the tradable float, 15.91 million are sold short by the bears. The short-sellers have also been increasing their bets from the last reporting period by 8.6%, or by about 1.25 million shares. If the bears are caught pressing their bets too hard ahead of this quarter, then we could easily see a large short squeeze post-earnings.
From a technical perspective, INCY is currently trading above both its 50-day and 200-day
moving averages, which is bullish. This stock has been uptrending like a beast for the last six months, with shares soaring from a low of $16.32 to a recent high of $26.30 a share. During that uptrend, shares of INCY have consistently made higher lows and higher highs, which is bullish technical price action. That move has now quickly pushed INCY within range of triggering a
breakout trade post-earnings. If you're bullish on INCY, then I would wait until after it reports earnings and look for long-biased trades if it can manage to trigger a break out above some near-term overhead resistance at $25.89 to $25.97 a share, and then its 52-week high of $26.30 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 1.6 million shares. If we get that action, then I would look for INCY to easily trade north of $30 a share post-earnings.
I would simply avoid INCY or look for short-biased trades if it fails to trigger that breakout after its earnings report, and it then takes out some near-term support at $25 a share with heavy volume. If we get that move, then INCY will setup to re-test and possibly take out its 50-day moving average of $23.55 a share if the bears spark a decent selloff post-earnings.
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.