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TheStreet Open House

5 Heavily-Shorted Earnings Plays

Stock quotes in this article: GMCR, BKS, OVTI, TIF, SPLK

I would simply avoid OVTI or look for short-biased trades if after earnings it fails to trigger that move, and then drops back below its 50-day moving average of $14.54 a share with heavy volume. If we get that move, then OVTI will set up to re-test or possibly take out its next major support level at $13.05 a share. Any move below $13.05 will then put $12 into focus for shares of OVTI.


Another earnings short-squeeze play is Tiffany (TIF), which is set to release numbers on Thursday before the market open. This company operates as a jeweler and specialty retailer. It also sells timepieces, sterling silver goods, china, crystal, stationery, fragrances, personal accessories and leather goods. Wall Street analysts, on average, expect Tiffany to report revenue of $859.11 million on earnings of 63 cents per share.

This company has seen an average of 16% growth in profit year-over-year for the last four quarters in a row. The biggest gain was seen during the third quarter of the last fiscal year when net income soared by 62.8%.

The current short interest as a percentage of the float for Tiffany is notable at 7.8%. That means that out of the 115.89 million shares in the tradable float, 9.82 million shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a short-covering rally if Tiffany can deliver the earnings news the bulls are looking for.

From a technical perspective, TIF is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last six months, with shares soaring from a low of $49.48 to its recent high of $66.78 a share. During that uptrend, shares of TIF have been mostly making higher lows and higher highs, which is bullish technical price action.

If you're bullish on TIF, then I would wait until after its report and look for long-biased trades as long as it's trending above its 50-day moving average of $62.78 a share with strong upside volume flows. Look for volume on that move that hits near or above its three-month average action of 1,839,420 shares. If we get that action, then TIF will set up to re-test or possibly take out its next major overhead resistance level at $66.78 to $69.01 a share. Any high-volume move above those levels will then put $70 to $72 into focus for shares of TIF.

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