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5 Stocks Ready to Surge on Bullish Earnings

Michael Kors

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My first earnings short-squeeze trade idea today is apparel and accessories maker Michael Kors (KORS - Get Report), which is set to report results on Tuesday before the market open. This company engages in the design, marketing, distribution, and retail of branded women's apparel and accessories, and men's apparel. Wall Street analysts, on average, expect Michael Kors to report revenue of $367.96 million on earnings of 20 cents per share.

Just this morning, Barclays initiated coverage on shares of Michael Kors with an overweight rating. This company has met or beaten Wall Street estimates during the last two quarters. In the last quarter, the company reported earnings per share of 22 cents, vs. estimates of 16 cents per share.

The current short interest as a percentage of the float for Michael Kors is notable at 3.1%. That means that out of the 115.22 million shares in the tradable float, 3.49 million shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a tradable short-squeeze if KORS can deliver the earnings news the bulls are looking for.

>>5 Stocks Poised for Breakouts

From a technical perspective, KORS is currently trading just above its 50-day moving average, which is bullish. This stock has been stuck in a sideways trading pattern for the past three months, with shares moving between $35.50 and $45.20 a share. A move outside of that range post-earnings will likely setup the next major trend for KORS.

If you're bullish on KORS, then I would wait until after they report and look for long-biased trades if this stock can manage to take out $45.20 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 3,062,180 shares. If we get that move, then look for KORS to re-test or possibly take out its next major overhead resistance level of $49.50 a share post-earnings.

I would simply avoid KORS or look for short-biased trades if after earnings it fails to trigger that move, and then drops some near-term support at $39 a share with heavy volume. If we get that move, then look for KORS to re-test and possibly take out its next major support levels at $37.77 to $35.50 a share.

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