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5 Short-Squeeze Plays Primed for Quick Profits


Another potential earnings short-squeeze trade is DSW (DSW - Get Report), which is set to release its numbers on Tuesday before the market open. This is a retailer of footwear and accessories. It offers a wide assortment of brand name and designer dress, casual and athletic footwear for women and men. Wall Street analysts, on average, expect DSW to report revenue of $589.15 million on earnings of 89 cents per share.

Just this morning, Brean Capital said they remain aggressive buyers of DSW ahead of its third quarter results. The firm cited valuation, trends showing the store ramp is on track, and the spread of brand awareness. The firm has the stock rated a buy with a $72 price target.

The current short interest as a percentage of the float for DSW is rather high at 10.3%. That means that out of the 37.42 million shares in the tradable float, 3.51 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 6.9%, or by about 227,000 shares. If the bears are caught leaning too hard into this quarter, then we could easily see a large short-squeeze develop post-earnings.

From a technical perspective, DSW is currently trending above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock has been downtrending for the last two months, with shares falling from a high of $69.15 to a recent low of $57.27 a share. During that move lower, shares of DSW have been consistently making lower highs and lower lows, which is bearish technical price action. That said, the stock has started to bounce hard right off its 200-day moving average of $58.28 and it's now pushing within range of triggering a near-term breakout trade.

If you're in the bull camp on DSW, then I would wait until after its report and look for long-biased trades once it manages to break out above its 50-day at $64.18 and then above some near-term overhead resistance at $64.27 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 472,808 shares. If we get that breakout, then look for DSW to trend up towards its next significant overhead resistance levels at $68 to $69.15 a share. Keep in mind that any move above $69.15 will push DSW into new 52-week high territory, which is bullish technical price action.
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