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TheStreet Open House

5 Earnings Short Squeeze Plays to Trade

I would simply avoid FOSL or look for short-biased trades if after earnings this stock fails to trigger that breakout, and then drops back below some near-term support at $92.50 a share with high volume. If we get that action, then look for FOSL to set up to re-test or possibly take out its 50-day moving average of $87.31 a share.

Quad Graphics

One potential earnings short-squeeze play in the printing services complex is Quad Graphics (QUAD), which is set to release numbers on Tuesday after the market close. This company's print products primarily include catalogs, consumer magazines, special interest publications, direct marketing materials etc. Wall Street analysts, on average, expect Quad Graphics to report revenue of $1.05 billion on earnings of 64 cents per share.

This stock has been uptrending very strong in 2012, with shares up nicely by 28%. That move has pushed shares of Quad Graphics within two points of its 52-week high of $20.30 a share ahead of its earnings report.

The current short interest as a percentage of the float for Quad Graphics is huge at 32.6%. That means that out of the 22 million shares in the tradable float, 6.55 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 1.8%, or by about 116,000 shares. Any bullish earnings news for QUAD could set this stock on fire with a big short-squeeze post-earnings.

From a technical perspective, QUAD is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending very strong for the last five months, with shares soaring from a low of $11.45 to its recent high of $20.30 a share. During that uptrend, shares of QUAD have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed QUAD within range of triggering a near-term breakout trade post-earnings.

If you're bullish on QUAD, then I would wait until after its report and look for long-biased trades if it can manage to break out above some key overhead resistance levels at $18.77 to $20.68 a share with high volume. Look for volume on that move that tracks in near or above its three-month average action of 157,033 shares. If QUAD triggers that breakout, then this stock could easily trend north of $25 to $30 a share post-earnings.

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