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TheStreet Open House

5 Earnings Short-Squeeze Plays

I would simply avoid HMIN or look for short-biased trades if after earnings it fails to trigger that breakout, and then moves back below $26.90 and its 50-day moving average of $26.32 a share with high volume. If we get that action, then HMIN will set up to re-test or possibly take out its next major support area at its 200-day moving average of $24.73 a share.

Michael Kors

Another potential earnings short-squeeze trade idea is Michael Kors (KORS), which is set to release its numbers on Tuesday before the market open. This company designs, markets and distributes women's apparel and accessories and men's apparel. It operates in three business segments namely retail, wholesale and licensing. Wall Street analysts, on average, expect Michael Kors to report revenue of $519.31 million on earnings of 40 cents per share.

This company has reported double or triple-digit earnings gains since it came public last year. Just last week, Buckingham said the recent weakness in the stock was presenting a buying opportunity.

The current short interest as a percentage of the float for Michael Kors is notable at 3.1%. That means that out of the 123.10 million shares in the tradable float, 3.86 million shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a solid short-covering rally if Michael Kors can deliver the earnings news bulls are looking for.

From a technical perspective, KORS is currently trading above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been trending sideways for the last two months, with shares moving between $50.20 on the downside and $58.62 on the upside. A high-volume move outside of that range post-earnings will likely set up the next major trend for KORS

If you're in the bull camp on KORS, then I would wait until after its report and look for long-biased trades once this stock manages to recapture its 50-day moving average of $53.90 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 3,917,790 shares. If we get that move, then look for KORS to re-test or possibly take out its next major overhead resistance level at $58.62 a share. Any high-volume move above $58.62 should be considered very bullish technical action, since it will push KORS into all-time high territory.

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