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My first earnings short-squeeze play today is chemical manufacturing stock
Monsanto(MON - Get Report), a provider of agricultural products for farmers, which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Monsanto to report revenue of $2.55 billion on a loss of 42 cents per share.
This stock has been uptrending very strong so far in 2012, with shares up close to 30%. Monsanto is currently trading just a point off its
52-week high of $91.95 a share ahead of the company's earnings report. The current short interest as a percentage of the float for Monsanto sits at 1%. That means that out of the 531.36 million shares in the tradable float, 5.57 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 4.4%, or by about 236,000 shares.
From a technical perspective, MON is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last four months, with shares soaring from a low of $69.70 to its recent high of $91.95 a share. During that uptrend, shares of MON have been consistently making higher lows and higher highs, which is bullish technical; price action. That move has now pushed MON within range of triggering a near-term breakout trade post-earnings.
If you're bullish on MON, then I would wait until after its report and look for long-biased trades if it can manage to break out above some near-term overhead resistance at $91.95 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 2.9 million shares. If we get that breakout, then look for MON to head north of $100 a share post-earnings.
I would simply avoid MON or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops below its 50-day moving average at $88.13 a share with heavy volume. If we get that move, then MON will setup to re-test or possibly take out its next significant support level at $84.86 a share post-earnings.
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