My final earnings short-squeeze trade idea is biotechnology and drugs player Affymax (AFFY), which is set to release numbers on Wednesday after the market close. This company is engaged in developing drugs to improve the treatment of serious and often life-threatening conditions. Its product candidate, peginesatide, is for the treatment of anemia in chronic kidney disease patients on dialysis. Wall Street analysts, on average, expect Affymax to report revenues of $11.30 million on a loss of 69 cents per share.
Just recently, partner Fresenius stated that it intends to dose more patients than predicted with Affymax's Omontys. Rodman & Renshaw said they think Affymax could exceed the firm's third-quarter and fourth-quarter estimates. The firm sees this news as a positive for Affymax, and it kept an outperform rating on the stock.
The current short interest as a percentage of the float for Affymax is very high at 17.8%. That means that out of the 30.81 million shares in the tradable float, 6.28 million are sold short by the bears. The short-sellers have also been increasing their bets from the last reporting period by 8.9%, or by about 511,000 shares. If the bears are caught pressing their bets too hard into this quarter, then we could easily see a large short-squeeze develop post-earnings.From a technical perspective, AFFY is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock recently exploded back above its 50-day moving average in July on massive upside volume. Following that move, the stock has started to move within a tight range between $17.38 and $15.40 a share. A move outside of that range post-earnings will likely setup the next major trend for AFFY. If you're bullish on AFFY, then I would wait until after they report earnings and look for long-biased trades, if it can manage to trigger a break out above some near-term overhead resistance at $16.98 to $17.33 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 1,021,410 shares. If we get that action, then look for AFFY to hit or trade north of $20 a share post-earnings. I would simply avoid AFFY or look for short-biased trades after earnings if it fails to trigger that breakout, and then takes out some near-term support at $15.40 a share with heavy volume. If we get that move, then AFFY will setup to re-test and possibly take out its 50-day moving average of $14.39 a share post-earnings. To see more potential earnings short squeeze plays, check out the Earnings Short Squeeze Plays portfolio on Stockpickr.
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