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5 Heavy Shorts To Consider

Stocks in this article: TFM BV PVH AEO EXPR

I would avoid PVH or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below some key near-term support at $106 a share with high volume. If we get that action, then PVH will set up to re-test or possibly take out its 50-day moving average of $99.95 a share. Any move below $99.95 will then put PVH into risk of filling some of its previous gap down towards $90 a share.

American Eagle Outfitters

Another earnings short-squeeze candidate is American Eagle Outfitters (AEO), which is set to release numbers on Wednesday before the market open. This is a specialty retailer that operates more than 1,000 retail stores in the U.S. and Canada, and online at ae.com. Wall Street analysts, on average, expect American Eagle Outfitters to report revenue of $872.95 million on earnings of 39 cents per share.

Just recently, BMO downgraded shares of American Eagle Outfitters from outperform to market perform with a price target of $20 due to a lack of catalysts to drive the price higher in the near term.

The current short interest as a percentage of the float for American Eagle Outfitters is notable at 8%. That means that out of the 172.88 million shares in the tradable float, 13.66 million shares are sold short by the bears. If American Eagle Outfitters delivers the earnings news the bulls are looking for, then this stock could explode higher post-earnings as the bears rush to cover some of their short positions.

From a technical perspective, AEO is currently trending below its 50-day moving average and above its 200-day moving average, which is neutral trendwise. This stock has been downtrending a bit for the last two months, with shares falling from a high of $22.97 to its recent low of $18.31 a share. During that downtrend, shares of AEO have been consistently making lower highs and lower lows, which is bearish technical price action. That said, AEO has now started to bounce right off its 200-day moving average of $18.35 a share and its quickly moving within range of triggering a near-term breakout trade.

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