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My final earnings short-squeeze play today is
Alcoa(AA - Get Report), which is set to release numbers on Tuesday after the market close. This company is engaged in the production and management of primary aluminum, fabricated aluminum and alumina combined, through its participation in technology, mining, refining, smelting, fabricating and recycling. Wall Street analysts, on average, expect Alcoa to report revenue of $5.57 billion on earnings of one cent per share.
This company reported in line results last quarter after topping Wall Street earnings in the prior quarter. Revenue rose 21.4% in the third quarter of the last fiscal year, 6% in the fourth quarter of the last fiscal year and 0.8% in the first quarter before dropping in the second quarter.
The current short interest as a percentage of the float for Alcoa is rather high at 7.7%. That means that out of the 1.07 billion shares in the tradable float, 82.18 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 2.5%, or by about 2.03 million shares.
From a technical perspective, AA is currently trading above its 50-day and just below 200-day, which is neutral trendwise. This stock recently sold off from its high of $9.93 a share right to its 50-day moving average of $8.86 a share. That move has now pushed AA within range of triggering a near-term breakout trade post-earnings.
If you're in the bull camp on AA, 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 $9.34 to $9.83 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 19.1 million shares. If we get that move, then AA will setup to re-test or possibly take out its next significant overhead resistance levels at $10.17 to $10.85 a share. Any high-volume move above $10.85 will setup AA to re-test $11.52 to $12 a share.
I would simply avoid AA or look for short-biased trades if after earnings it fails to trigger that breakout and then moves back below its 50-day at $8.86 a share with high volume. If we get that move, then AA will set up to re-test or possibly take out its next major support levels at $8.39 to $7.94 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.