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Another potential earnings short-squeeze trade is heavy construction materials supplier
Texas Industries(TXI), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Texas Industries to report revenue of $186.66 million on a loss of 7 cents per share.
This stock has been uptrending very strong in 2012, with shares up around 40%. This bullish price action has shares of Texas Industries trending just a few points off its 52-week high of $45.68 a share ahead of its report.
The current short interest as a percentage of the float for Texas Industries is very high at 18.6%. That means that out of the 12.63 million shares in the tradable float, 3.88 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 99,000 shares. If the bears are caught leaning too hard into this quarter, then we could easily see a monster short-squeeze develop post-earnings.
From a technical perspective, TXI is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been trending within a sideways trading pattern for the last two months and change, with shares bouncing between $38.14 on the downside and $45.68 on upside. A move outside of that trading range post-earnings will likely setup the next major trend for TXI.
If you're in the bull camp on TXI, then I would wait until after its earnings report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $44.54 to $45.68 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 291,108 shares. If we get that breakout, then TXI will setup to re-test or possibly take out its next major overhead resistance levels at $46.27 to $47.15 a share. If those areas get cleared post-earnings, then TXI will likely trade north of $50 a share.
I would simply avoid TXI or look for short-biased trades if after earnings it fails to trigger that breakout, and then moves back below its 50-day moving average of $56.32 a share with high volume. If we get that move, then RHT will setup to re-test or possibly take out its 200-day moving average of $52.91 a share post-earnings.