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5 Earnings Short-Squeeze Plays to Consider

With that in mind, here's a look at several stocks that could experience big short squeezes when they report earnings this week.

Salesforce.com

My first earnings short-squeeze trade idea is Salesforce.com (CRM - Get Report), which is set to release numbers on Tuesday after the market close. This company provides enterprise cloud computing and social enterprise solutions, and it's dedicated to helping customers transform themselves into social enterprises. Wall Street analysts, on average, expect Salesforce.com to report revenue of $776.52 million on earnings of 32 cents per share.

A William Blair analyst recently said that Salesforce.com could beat Wall Street estimates on both its top and bottom lines in the quarter. That William Blair analyst said that they believed Salesforce.com inked a sizable deal with a global sports apparel manufacturer during the quarter.

The current short interest as a percentage of the float for Salesforce.com is rather high at 11.7%. That means that out of the 127.54 million shares in the tradable float, 14.94 million shares are sold short by the bears. If Salesforce.com can beat earnings and raise guidance, then this stock could explode higher post-earnings.

From a technical perspective, CRM is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been trading sideways for the last month, with shares moving between $139.04 on the downside and $149.57 on the upside. A move outside of that range post-earnings will likely set up the next major trend for CRM.

If you're bullish on CRM, then I would wait until after its report and look for long-biased trades once this stock manages to break out above some near-term overhead resistance levels at $149.57 to $150.20 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 1,947,780 shares. If that breakout triggers, then CRM will set up to re-test or possibly take out its next major overhead resistance levels at $155 to $159.85 a share.

I would simply avoid CRM or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 200-day moving average of $143.95 a share. If we get that action, then CRM will set up to re-test or possibly take out its next major support levels at $139.08 to $139.04 a share. Any high-volume move below those levels could send CRM back below $130 a share post-earnings.
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