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5 Earnings Short-Squeeze Plays

CREE ChartCREE data by YCharts


My final earnings short-squeeze play is semiconductor player Cree (CREE), which is set to release numbers on Tuesday after the market close. This company develops and manufactures semiconductor materials and devices primarily based on silicon carbide, gallium nitride and related compounds. Wall Street analysts, on average, expect Cree to report revenue of $306.31 million on earnings of 23 cents per share.

This company has missed Wall Street estimates for the last three quarters in a row. During the last quarter, Cree reported earnings per share of 20 cents, which fell just short of meeting Wall Street estimates of earnings of 21 cents per share. The current short interest as a percentage of the float for Cree is very high 16.3%. That means that out of the 112.98 million shares in the tradable float, 18.45 million are sold short by the bears.

From a technical perspective, CREE is currently trading above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock was hit hard by the sellers off its May high of $33.45 to its June low of $22.56 a share. During that move lower, shares of CREE were doing nothing but making lower highs and lower lows, which is bearish technical price action. That said, this stock has started to stabilize during the last two months, with shares now trading between $22.25 and $27.90 a share. A move outside of that range post-earnings will likely setup the next major trend for CREE.

If you're bullish on CREE, then I would wait until after they report earnings and look for long-biased trades if it can manage to break out above some near-term overhead resistance at $26.20 to $26.75 a share, and then above more resistance at $27.09 a share with high volume. If we get that action, then CREE could easily trade up towards $30 to $32 a share, or possibly even higher if the bulls gain full control of this stock post-earnings.

I would simply avoid CREE after earnings if this stock fails to trigger that breakout, and then moves back below its 50-day moving average of $24.07 a share with heavy volume. If we get that action, then look for CREE to re-test and possibly take out its recent low of $22.25 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.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to and maintains the website, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.
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