A potential earnings short-squeeze trade in the aerospace and defense complex is AAR (AIR), which is set to release numbers on Wednesday after the market close. This company is a diversified provider of products and services to the worldwide aviation and government and defense markets. Wall Street analysts, on average, expect AAR to report revenue of $532.95 on earnings of 38 cents per share.
This company recently announced that it expects fiscal first-quarter earnings and revenue to come in above Wall Street's expectations. The company said it foresees earnings of 42 cents to 45 cents per share and it anticipates revenue in a range of $540 million to $550 million.The current short interest as a percentage of the float for AAR sits at 5.9%. That means that out of the 36.49 million shares in the tradable float, 2.24 million shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a solid short-covering rally if AAR reports a solid quarter and issues bullish forward guidance. From a technical perspective, AIR is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock recently broke out above some stiff overhead resistance at $14.44 to $14.74 a share with heavy volume. That move pushed AIR back above its 200-day moving average with strong upside volume flows. If you're in the bull camp on AIR, then I would wait until after earnings and look for long-biased trades if the stock can manage to take out some near-term overhead resistance at $17.45 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 456,266 shares. If we get that breakout, then AIR will have a great chance of re-testing its next significant overhead resistance level at $20 to $22.51 a share post-earnings. I would simply avoid AIR or look for short-biased trades if after earnings the stock fails to trigger that breakout, and then moves back below $16 a share with high volume. If we get that move, then AIR could re-fill some of its previous gap and setup to re-test or possibly take out its 50-day moving average of $14.34 a share.
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