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One potential earnings short-squeeze trade is health care facilities player
Bio-Reference Laboratories(BRLI), which is set to release numbers on Thursday before the market open. This company is engaged in providing laboratory testing services to customers in the greater New York metropolitan area as well as in other states. Wall Street analysts, on average, expect Bio-Reference Laboratories to report revenue of $173.67 million on earnings of 43 cents per share.
If you're looking for a strong trending heavily-shorted healthcare stock ahead of its earnings report this week, then make sure to take a hard look at shares of Bio-Reference Laboratories. This stock has been on fire so far in 2012, with shares exploding higher by over 70%. As we get close to its earnings report, shares of BRLI are trending just three points off its 52-week high of $30.15 a share.
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The current short interest as a percentage of the float for Bio-Reference Laboratories is extremely high at 25.1%. That means that out of the 24.47 million shares in the tradable float, 6.13 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 2.6%, or by about 154,000 million shares. If the bears are pressing their luck in front of this quarter, and they end up being wrong, then we could easily see a monster short-squeeze since this company's float is very small.
From a technical perspective, BRLI is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending very strong for the last three months, with shares exploding higher from a low of $18.29 to its recent high of $30.15 a share. During that sharp move higher, shares of BRLI have been mostly making higher lows and higher highs, which is bullish technical price action. That move has pushed BRLI within range of triggering a major breakout trade post-earnings.
If you're in the bull camp on BRLI, then I would wait until after they report earnings and look for long-biased trades if this stock holds its trend above $26.08 to its 50-day moving average of $26.75 a share with strong upside volume flows. I would consider any upside volume day that registers near or above its three-month average action of 241,020 shares as bullish. If BRLI can hold that trend, then this stock has a great chance of re-testing and possibly taking out its 52-week high of $30.15 a share post-earnings.
I would simply avoid BRLI or look for short-biased trades if after earnings the stock fails to hold that trend, and then takes out that major near-term support level at $26.08 a share with high volume. If we get that move, then BRLI will setup to re-test and possibly take out its next major support level at $24.58 a share post-earnings. It's possible that BRLI could drop back towards its 200-day moving average of $21.23 a share if those major support levels are taken out post-earnings.