5 Earnings Short-Squeeze Plays

I would simply avoid PBY or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 50-day moving average of $10.22 a share with heavy volume. If we get that move, then PBY will set up to re-test or possibly take out its next major support levels at $9.85 to $9.48 a share. Any move below $9.48 could send PBY down towards $9 a share or lower post-earnings.

Big Lots

Another potential earnings short-squeeze play is Big Lots (BIG), which is set to release its numbers on Tuesday before the market open. This company operates as a broadline closeout retailer in the U.S. Wall Street analysts, on average, expect Big Lots to report revenue of $1.14 billion on a loss of 24 cents per share.

If you're looking for a heavily-shorted stock that's been beaten-down by the bears heading into its quarter, then make sure to take a strong look at shares of Big Lots. This stock has been hammered by the sellers so far in 2012, with shares down by 26%.

The current short interest as a percentage of the float for Big Lots is pretty high at 11.9%. That means that out of the 50.08 million shares in the tradable float, 6.94 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of BIG could explode higher post-earnings.

From a technical perspective, BIG is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last three months, with shares plunging from a high of $39.23 to its recent low of $26.69 a share. During that downtrend, shares of BIG have been mostly making lower highs and lower lows, which is bearish technical price action. That said, the stock has recently rebounded off that low of $26.69 a share and its quickly moving within range of a near-term breakout trade.

If you're in the bull camp on BIG, then I would wait until after its report and look for long-biased trades once it manages to break out above some near-term overhead resistance levels at $28.53 to its 50-day at $29.33 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 1,144,500 shares. If that breakout triggers hits, then BIG will set up to re-test or possibly take out its next major overhead resistance levels at $31.72 to $31.90 a share. Any high-volume move above $31.90 will then give BIG a chance to re-fill some of its gap down zone from August that started near $39 a share.

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