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Another potential earnings short-squeeze trade is medical equipment and supplies player
Intuitive Surgical(ISRG), which designs, manufactures and markets da Vinci Surgical Systems, EndoWrist instruments and surgical accessories. The company is set to release its numbers on Tuesday after the market close, and Wall Street analysts, on average, expect Intuitive Surgical to report revenue of $534.93 million on earnings of $3.50 per share.
During the last quarter, this company topped Wall Street estimates by 22 cents, after reporting a profit of $3.75 a share versus estimates of $3.53 a share. That registered the fourth straight quarter where Intuitive Surgical beat Wall Street estimates. For the second quarter, profit jumped 31.9% to $154.9 million from $117.4 million the year earlier. Revenue soared 26% to $536.5 million from $425.7 million.
The current short interest as a percentage of the float for Intuitive Surgical is notable at 5.3%. That means that out of the 39.93 million shares in the tradable float, 2.08 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 6.4%, or by about 124,000 shares. If the shorts are caught pressing too hard into this quarter, then we could easily see a large short-squeeze kickoff post-earnings.
From a technical perspective, ISRG is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been trending range-bound for the last month and change, with shares moving between $481.26 on the downside and $523.76 on the upside. A high-volume move outside of that range post-earnings will likely set up the next major trend for ISRG.
If you're in the bull camp on ISRG, then I would wait until after its report and look for long-biased trades if this stock can manage to break out above some past overhead resistance levels at $521.63 to $523.76 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 324,922 shares. If ISRG triggers that breakout, then look for the stock to fill some of its gap from back in July that started above $550 a share. This stock could even potentially hit $570 a share post-earnings.
I would simply avoid ISRG or look for short-biased trades if after earnings this stock fails to trigger that breakout, and then drops back below its 50-day moving average of $502.79 a share with high volume. If we get that move, then ISRG will setup to re-test or possibly take out its next major support levels at $489.04 to $481.26 a share. If those levels get taken out with volume, then ISRG will challenge more previous support at $471.04 to $467.26 a share.
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