5 Heavily-Shorted Earnings Plays

I would simply avoid BKS or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below some key support levels at $14.34 to $14.06 a share with heavy volume. If we get that action, then BKS will set up to trade down towards its next major support levels at around $12.50 to $12 a share.

OmniVision Technologies

One potential earnings short-squeeze candidate is OmniVision Technologies (OVTI), which is set to release numbers on Thursday after the market close. This company designs, develops and markets highly integrated semiconductor image-sensor devices. Wall Street analysts, on average, expect OmniVision Technologies to report revenue of $373.80 million on earnings of 30 cents per share.

If you're looking for a heavily-shorted stock that's been uptrending strongly so far in 2012, then make sure to check out shares of OVTI. This stock has been racking up gains on the year, with shares up around 24%. Shares of OVTI are currently trading just six points off its 52-week high of $21.11 a share ahead of its report.

The current short interest as a percentage of the float for OmniVision Technologies is rather high at 15.4%. That means that out of the 49.12 million shares in the tradable float, 8.17 million shares are sold short by the bears. If OmniVision can deliver the earnings news the bulls are looking for, then a decent short-squeeze could easily trigger post-earnings.

From a technical perspective, OVTI is currently trending above its 50-day moving average and right below its 200-day moving average, which is neutral trendwise. This stock has been trending sideways for the past two months, with shares moving between $13.05 on the downside and $15.49 on the upside. A move outside of that range post-earnings will likely set up the next major trend for shares of OVTI.

If you're bullish on OVTI, then I would wait until after its report and look for long-biased trades as long as it's trending above $15.49 and its 200-day moving average of $15.63 a share with strong upside volume flows. Look for volume that registers near or above its three-month average volume of 1,756,040 shares. If we get that action, then OVTI will set up to re-test or possibly take out its next major overhead resistance levels at $17 to $17.85 a share. Any high-volume move above $17.85 will then put $19.64 to $21.11 into focus for OVTI.

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