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One potential earnings short-squeeze trade is semiconductor player
OmniVision Technologies(OVTI), which is set to release numbers on Thursday after the market close. This company designs, develops and markets integrated and semiconductor image-sensor devices. Wall Street analysts, on average, expect OmniVision Technologies to report revenue of $243.77 million on earnings of 22 cents per share.
If you're looking for a strong trending heavily-shorted technology stock heading into its earnings report this week, then make sure to check out shares of OmniVision Technologies. This stock has exploded to the upside in 2012, with shares up over 30%. Shares of OmniVision Technologies are trading just four points off its
52-week high of $21.11 a share as we approach its earnings report.
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The current short interest as a percentage of the float for OmniVision Technologies is very high at 15.8%. That means that out of the 41.77 million shares in the tradable float, 8.27 million shares are sold short by the bears. This is a large amount of bears in involved in a stock with a relatively low float. If the bulls get the news they're looking for, then we could easily see a sizable short-squeeze develop post-earnings. From a technical perspective, OVTI is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock formed a major bottom back in July at around $12 to $11.82 a share. After forming that bottom, shares of OVTI skyrocketed to its current price of around $16 a share. During that sharp move higher, shares of OVTI have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed OVTI within range of triggering a major breakout trade post-earnings.
If you're bullish on OVTI, then I would wait until after they report earnings and look for long-biased trades if this stock can manage to break out above some near-term overhead resistance at $16.44 to $17.57 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 2.2 million shares. If we get that move, then look for OVTI to re-test and possibly take out its next major overhead resistance levels at $19.64 to $20.36 a share post-earnings.
I would avoid OVTI or look for short-biased trades if after earnings it fails to trigger that breakout, and then moves below its 200-day moving average of $15.02 a share with heavy volume. If we get that action, then OVTI will setup to re-test and possibly take out its 50-day moving average of $13.78 a share post-earnings.