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5 Hated Stocks Set to Soar on Earnings

EZCH ChartEZCH data by YCharts
EZchip Semiconductor

Another possible earnings short-squeeze play is semiconductor player EZchip Semiconductor (EZCH), which is set to release its numbers on Wednesday before the market open. This is a fabless semiconductor company that is engaged in the development and marketing of Ethernet network processors for networking equipment. Wall Street analysts, on average, expect EZchip Semiconductor to report revenues of $15.51 million on earnings of 26 cents per share.

Another strong trending heavily shorted stock heading into its earnings report this week is EZchip Semiconductor. This stock has skyrocketed so far in 2012 with shares up over 40%, and it's currently trading just seven points off its 52-week high of $46.79 a share.

The current short interest as a percentage of the float for EZchip Semiconductor is rather high at 11.1%. That means that out of the 26.80 million shares in the tradable float, 3.09 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 9.9%, or by about 279,000 shares. If the bears are caught leaning too hard into this quarter, then we could easily see a monster short-squeeze develop post-earnings.

From a technical perspective, EZCH is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock tagged a near-term low in July at $31.30 a share, and then subsequently soared back above both its 50-day and 200-day moving averages. That move has now pushed EZCH within range to trigger a near-term breakout trade post-earnings.

If you're in the bull camp on EZCH, then I would wait until after they report earnings and look for long-biased trades, if this stock breaks out above some near-term overhead resistance at $40.25 to $40.34 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 335,784 shares. If we get that move, then EZCH will have a great chance of re-testing and possibly taking out its next major overhead resistance levels at $43.34 to $45 a share.

I would simply avoid EZCH or look for short-biased trades if after earnings this stock fails to trigger that breakout, and then takes out Tuesday's low of $38.33 a share with heavy volume. If we get that action, then EZCH will setup to re-test and possibly take out both its 50-day at $36.67 and its 200-day at $36.47 a share post-earnings.

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