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TheStreet Open House

5 Earnings Short-Squeeze Plays

Stocks in this article: PBYBIGMFRMPPLAB

I would avoid MFRM or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below some key near-term support levels at $27 to $25.88 a share with high volume. If we get that action, then MFRM will set up to re-test or possibly take out its next major support level at $22.82 a share.

Pandora Media

Another earnings short-squeeze trade idea is Pandora Media (P), which is set to release numbers on Tuesday after the market close. This company provides internet radio services in U.S. Wall Street analysts, on average, expect Pandora Media to report revenue of $117.07 million on earnings of 1 cent 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 check out shares of Pandora Media. This stock has been hit hard by the bears during the last three months, with shares off by 26%.

The current short interest as a percentage of the float for Pandora Media is extremely high at 31.3%. That means that out of the 109.95 million shares in the tradable float, 34.22 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 1.5%, or by about 510,000 shares. If the bears are caught pressing their bets too hard into this quarter, then we could easily see a monster short-squeeze develop post-earnings.

From a technical perspective, P 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 $12.57 to its recent low of $7.08 a share. During that downtrend, shares of P have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of P have recently rebounded sharply off that $7.08 low and the stock is quickly moving within range of triggering a near-term breakout trade post-earnings.

If you're bullish on P, then I would wait until after its report and look for long-biased trades if this stock can manage to break out above some near-term overhead resistance levels at $9.02 to $9.11 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 4,981,850 shares. If that breakout hits, then P will set up to re-test or possibly take out its next major overhead resistance level at $10.04 to $10.10 a share. If those levels get taken out with volume, then P will have a chance to trade above $11 a share post-earnings.

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