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TheStreet Open House

5 Heavily-Shorted Earnings Plays

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

I would avoid TIF or look for short-biased trades if after earnings it fails to trigger that move, and then drops back below its 200-day moving average of $61.30 a share with heavy volume. If we get that move, then TIF will set up to re-test or possibly take out its next major support levels at $58.88 to $57.52 a share. Any high-volume move below those levels will then put $55 to $53 into focus for shares of TIF.


My final earnings short-squeeze trade idea is Splunk (SPLK), which is set to release numbers on Thursday after the market close. This company provides an innovative software platform that enables organizations to gain real-time operational intelligence by harnessing the value of their data. Wall Street analysts, on average, expect Splunk to report revenue of $46.77 million on a loss of 2 cents per share.

If you're looking for a heavily-shorted stock that's been hit hard by the sellers heading into its report, then make sure to check out shares of Splunk. This stock has been a favorite target of the bears, with shares off by around 20% during the last six months.

The current short interest as a percentage of the float for Splunk is rather high at 11.2%. That means that out of the 54.18 million shares in the tradable float, 5.54 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 10.1%, or by about 510,000 shares. If the bears are caught pressing their bets too aggressively into this quarter, then this stock could easily see a monster short-squeeze develop post-earnings.

From a technical perspective, SPLK is currently trending below its 50-day moving average, which is bearish. This stock has been downtrending badly over the last three months, with shares dropping from a high of $39.75 to its recent low of $26.10 a share. During that downtrend, shares of SPLK have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of SPLK have started to rebound of that recent low and move within range of triggering a near-term breakout trade.

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