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4 Stocks Poised to Pop on Earnings

Constellation Brands

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My final earnings short-squeeze trade idea is alcoholic beverages producer Constellation Brands (STZ - Get Report), which is set to release numbers on Friday before the market open. Wall Street analysts, on average, expect Constellation Brands to report revenue of $710.09 million on earnings of 54 cents per share.

This stock has been uptrending extremely strong so far in 2012, with shares up a whopping 60%. This bullish price action has pushed shares of Constellation Brands within one point of its 52-week high of $34.20 ahead of its report. The current short interest as a percentage of the float for Constellation Brands sits at 1.9%. That means that out of the 147.45 million shares in the tradable float, 2.82 million shares are sold short by the bears.

From a technical perspective, STZ is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been trending sideways for the past month and change, between $32 and $34.20 a share. If we get a move topside of that trading pattern post-earnings, then we will likely see the next major trend for STZ develop.

If you're in the bull camp on STZ, 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 $34.16 to $34.20 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 2.8 million shares. If we get that breakout, then look for STZ to possibly hit $40 a share or higher post-earnings.

I would simply avoid STZ or look for short-biased trades if after earnings it fails to trigger that breakout, and then moves back below some near-term support $32 to $31.61 a share with high volume. If we get that move, then STZ will setup to re-test or possibly take out its next significant support levels at $29 to $28 a share.

To see more potential earnings short squeeze plays, check out the Earnings Short Squeeze Plays portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.


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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to and maintains the website, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.
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