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One potential earnings short-squeeze trade is retail apparel player
Urban Outfitters(URBN - Get Report), which is set to release numbers on Monday after the market close. This lifestyle specialty retail company operates under the Urban Outfitters, Anthropologie, Free People, Terrain and BHLDN brands. Wall Street analysts, on average, expect Urban Outfitters to report revenue of $671.58 million on earnings of 33 cents per share.
During the last quarter, this company reported a profit of 23 cents per share vs. Wall Street estimates of 20 cents per share. During the fourth quarter, this company missed Wall Street expectations by 3 cents per share.
The current short interest as a percentage of the float for Urban Outfitters is rather high at 9.2%. That means that out of the 106.57 million shares in the tradable float, 9.95 million shares are sold short by the bears. This is a relatively high short interest on a stock with a pretty low tradable float. Any bullish earnings news for URBN could easily spark a sizeable short-squeeze post-earnings.
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From a technical perspective, URBN is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock triggered a breakout trade back in July once it cleared some overhead resistance levels at $26.68 to $28.89 a share with high volume. Following that breakout, shares of URBN ran up to a recent high of $31.81 a share. That move has now pushed URBN within range of triggering another major breakout trade post-earnings.
If you're bullish on URBN, then I would wait until after they report and look for long-biased trades if this stock can manage to break out above some near-term overhead resistance at $31.39 to $31.81 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 2,565,980 shares. If we get that move, then look for URBN to re-test and possibly take out its next significant overhead resistance level at $33.90 a share post-earnings.
I would avoid URBN or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops below some near-term support at $30 a share, and also its 50-day moving average of $29.16 a share with heavy volume. If we get that action, then URBN will setup to re-test and possibly take out its 200-day moving average of $28 a share post-earnings.