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TheStreet Open House

4 Stocks Poised to Pop on Earnings

Resources Connection

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Another potential earnings short-squeeze trade is business services player Resources Connection (RECN), which is set to release its numbers on Tuesday after the market close. This professional services firm that provides clients with experienced professionals specializing in finance, accounting, risk management and internal audit, corporate advisory and strategic communications. There are no analyst estimates available for Resources Connection.

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This stock is off to a strong start in 2012, with shares up around 25% so far. Shares of Resources Connection are trading just one point off their 52-week high of $14.49 as we near the company's earnings report. The current short interest as a percentage of the float for Resources Connection stands at 3.7%. That means that out of the 40.50 million shares in the tradable float, 1.14 million shares are sold short by the bears.

From a technical perspective, RECN is currently trading above both its 50-day and 200-day moving averages, which is bullish. Shares of RECN recently formed a double bottom chart pattern at around $10.89 to $11.04 a share, and then subsequently went on to soar to its recent high of $13.61 a share. During that spike higher, shares of RECN were consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed RECN within range of triggering a near-term breakout trade post-earnings.

If you're in the bull camp on RECN, then I would wait until after its report and look for long-biased trades if this stock can manage to break out above some near-term overhead resistance levels at $13.61 to $14.36 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 204,956 shares. If RECN triggers that breakout, then this stock will have a great chance of re-testing or possibly taking out its next overhead resistance levels at $16 to $17 a share.

I would simply avoid RECN or look for short-biased trades if after earnings this stock fails to trigger that breakout, and then drop below some near-term support at $12.75 to $12.50 a share with high volume. If we get that move, then RECN will setup to re-test or possibly take out its 200-day at $12.16 and its 50-day at $12.08 a share post-earnings.

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