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TheStreet Open House

5 Earnings Short-Squeeze Plays

VSI Chart VSI data by YCharts

Vitamin Shoppe

My first earnings short-squeeze play is vitamin and supplement maker Vitamin Shoppe (VSI), which is set to report results on Tuesday before the market open. This company is a specialty retailer and direct marketer of vitamins, minerals, herbs, specialty supplements, sports nutrition and other health and wellness products. Wall Street analysts, on average, expect Vitamin Shoppe to report revenue of $242.15 million on earnings of 51 cents per share.

If you're looking for a strong trending stock heading into its earnings report this week, then make sure to check out shares of Vitamin Shoppe. This stock has been soaring so far in 2012 with shares up over 40%, and its currently trading just a few points off its 52-week high of $58.88 a share.

The current short interest as a percentage of the float for Vitamin Shoppe is notable at 8.5%. That means that out of the 26.22 million shares in the tradable float, 2.26 million shares are sold short by the bears. This is a decent amount of bears in a stock with a relatively low float. If the bulls get the news they're looking for, then this stock could easily see a massive short-squeeze post-earnings.

From a technical perspective, VSI is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending very strong for the past six months, with shares soaring from a low of $41.62 to a recent high of $58.88 a share. During that uptrend, shares of VSI have consistently made higher lows and higher highs, which is bullish technical price action. That move has now pushed VSI within range of triggering a near-term breakout trade.

If you're bullish on VSI, then I would wait until after earnings and look for long-biased trades if this stock can manage to trigger a break out above its all-time high of $58.88 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 458,895 shares. If we get that action, then VSI should easily trade north of $60 a share post-earnings.

I would simply avoid VSI or look for short-biased trades if after earnings it fails to trigger that breakout, and then moves back below its 50-day moving average of $53.51 a share with high volume. If we get that action, then VSI could possibly trade below $50 a share post-earnings.

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