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One possible earnings short-squeeze play is specialty retail player
Teavana(TEA), which is set to release numbers on Tuesday after the market close. This company is a retailer of loose-leaf teas, authentic artisanal teawares and other tea-related merchandise. Wall Street analysts, on average, expect Teavana to report revenue of $40.50 million on earnings of 2 cents per share.
Teavana has been destroyed by the sellers during 2012, with shares down by over 40%. Its current short interest as a percentage of the float is extremely high at 24.3%. That means that out of the 3.02 million shares in the tradable float, 2.34 million shares are sold short by the bears. This is heavily-shorted stock with a ridiculously low float. Any bullish news out of Teavana could spark a monster short-squeeze post-earnings.
From a technical perspective, TEA is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been slammed the bears during the last four months, with shares dropping from $22.58 to $10.75 a share. During that plunge, shares of TEA have consistently made lower highs and lower lows, which is bearish price action. That said, shares of TEA have started to trend sideways during the last month between $10.75 and $12.47 a share. A move outside of that sideways trading pattern post-earnings will likely setup the next major trend for TEA.
If you're in the bull camp on TEA, then I would look for long-biased trades after earnings if this stock manages to trigger breakout trade above some near-term overhead resistance levels at $11.98 to $12.47 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 166,865 shares. If we get that move, then TEA will setup to re-test and possibly take out its next major overhead resistance levels at $14.22 to $14.49 a share. A move above $14.49 will give TEA the chance to re-fill a previous gap down that started at around $17 a share.
I would simply avoid TEA or look for short-biased trades after earnings if the stock fails to trigger that breakout and then moves back below some major near-term support areas at $11.03 to $10.75 a share with high volume. If we get that action, then TEA will enter new 52-week low territory, which is bearish technical price action.