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TheStreet Open House

5 Earnings Short-Squeeze Plays to Trade

I would avoid KIOR or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops below some near-term support at $6.50 to $6 a share with heavy volume. If we get that action, then KIOR will set up to re-test or possibly take out its 52-week low of $4.82 a share.

Seattle Genetics

My final earnings short-squeeze trade idea is Seattle Genetics (SGEN), which is set to release numbers on Wednesday after the market close. This is a biotechnology company, which is focused on the development and commercialization of monoclonal antibody-based therapies for the treatment of cancer and autoimmune disease. Wall Street analysts, on average, expect Seattle Genetics to report revenue of $52.66 million on a loss of 15 cents per share.

During the last quarter, this company reported a net loss of 15 cents per share versus Wall Street estimates of a loss of 15 cents per share. This follows after two straight quarters of exceeding expectations. Seattle Genetics is hoping to extend its streak of double-digit revenue this quarter to five in a row. The company has averaged year-over-year revenue growth of more than threefold over the last four quarters.

The current short interest as a percentage of the float for Seattle Genetics is extremely high at 20.8%. That means that out of the 97.28 million shares in the tradable float, 24.12 million shares are sold short by the bears. This stock could explode to the upside post-earnings if the bulls get the news they're looking for.

From a technical perspective, SGEN is currently trading below its 50-day moving average and above it 200-day moving average, which is neutral trendwise. This stock has been downtrending for the last two months, with shares falling from $29.83 to its recent low of $24 a share. During that drop, shares of SGEN have been mostly making lower highs and lower lows, which is bearish technical price action. That said, the stock has held its 200-day and started to find some buying interest near $24 a share.

If you're in the bull camp on SGEN, I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $25.90 to $26.60 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 788,751 shares. If we get that breakout, then look for SGEN to set up to re-test or possibly take out its next major resistance level at $27.83 a share. Any high-volume move above $27.83 will then put $29.83 into focus for SGEN.

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