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Another possible earnings short-squeeze trade is office supplies player
Staples(SPLS - Get Report), which is set to release numbers on Wednesday before the market open. This is an office products company. Wall Street analysts, on average, expect Staples to report revenue of $5.73 billion on earnings of 22 cents per share.
During the last quarter, this company reported net income of 30 cents per share, which was in-line with the average Wall Street estimate. That marked the third straight quarter that Staples has met Wall Street estimates. This company is looking to improve from a profit drop last quarter that snapped a positive streak of results.
The current short interest as a percentage of the float for Staples is rather high at 8.7%. That means that out of the 683.50 million shares in the tradable float, 59.38 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 15.6%, or by about 8 million shares. If the bears are caught leaning too hard into this quarter, then we could easily see a decent short-covering rally post-earnings.
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From a technical perspective, SPLS is currently trading above its 50-day moving average and below its 200-day
moving average, which is neutral trendwise. This stock has been trading range bound for the last three months, with shares moving between $12.10 on the downside and $13.70 on the upside. A move outside of that range post-earnings will likely setup the next major trend for SPLS.
If you're in the bull camp on SPLS, then I would look for long-biased trades after earnings if this stock manages to trigger a near-term break out above some
overhead resistance levels at $13.49 to $13.70 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 11,087,900 shares. If we get that move, then look for SPLS to re-test and possibly take out its next major overhead resistance level at $14.38 a share.
I would simply avoid SPLS or look for short-biased trades after earnings the stock fails to trigger that breakout, and then moves back below some near-term support at its 50-day moving average of $12.78 a share with high volume. If we see that move, then SPLS will setup to re-test or possibly take out its next major support level at $12.10 a share post-earnings.