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5 Heavily-Shorted Earnings Plays

>>5 Dividend Stocks Itching to Pay You More

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

Green Mountain Coffee

My first earnings short-squeeze trade idea is Green Mountain Coffee (GMCR - Get Report), which is set to release numbers on Tuesday after the market close. This company is engaged in the specialty coffee and coffee maker businesses. Wall Street analysts, on average, expect Green Mountain Coffee to report revenue of $902.23 million on earnings of 48 cents per share.

The current short interest as a percentage of the float for Green Mountain Coffee is extremely high at 39.2%. That means that out of the 127.38 million shares in the tradable float, 49.71 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 1.8%, or by around 876,000 shares. If the bears are caught pressing their bets to hard into this quarter, then we could easily see a monster short-squeeze develop post-earnings.

From a technical perspective, GMCR is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock has been uptrending for the last two months, with shares moving higher from a low of $21.33 to its recent high of $30.40 a share. During that uptrend, shares of GMCR have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed GMCR within range of triggering a near-term breakout trade post-earnings.

If you're bullish on GMCR, 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 $30.40 to $33.15 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 5,739,480 shares. If that breakout triggers, then GMCR will set up to re-fill some of its massive gap down zone from back in May that started near $50 a share.

I would simply avoid GMCR or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below some near-term support at $28 a share with heavy volume. If we get that action, then GMCR will set up to re-test or possibly take out its 50-day moving average of $25.09 a share. Any move below its 50-day will set up GMCR to re-test some previous support at $23.28 a share.
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