With that in mind, here's a look at several stocks that could experience big short squeezes when they report earnings this week.
My first earnings short-squeeze play is Francesca's (FRAN), which is set to release numbers on Wednesday before the market open. This company operates a chain of retail boutiques in the U.S. The company's retail boutiques offer apparel, jewelry, accessories, and gifts to female customers. Wall Street analysts, on average, expect Francesca's to report revenue of $71.24 million on earnings of 22 cents per share.Just this morning, Jefferies upgraded shares of Francesca's to buy from hold and slapped a $38 price target on the stock. The firm said that Francesca's is looking good for the holidays. Also, RBC Capital recently said that the weakness in FRAN was mostly due to concerns regarding the retirement of its young CEO. The firm remains upbeat about the new CEO and believes that the company's business trends have probably continued to be good. RBC Capital has an outperform rating and $42 price target on the stock. The current short interest as a percentage of the float for Francesca's is extremely high at 35.8%. That means that out of the 34.78 million shares in the tradable float, 12.09 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 22.8%, or by about 2.24 million shares. If the bears are caught pressing their bets into this quarter, then we could easily see a large short-squeeze get set off post-earnings. From a technical perspective, FRAN is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been trending sideways for the last few weeks, with shares moving between $24.95 on the downside and $27.21 on the upside. A move outside of that range post-earnings will likely set up shares of FRAN for its next major trend. If you're bullish on FRAN, then I would wait until after its report and look for long-biased trades once this stock manages to break out above some near-term overhead resistance levels at $27.21 to its 200-day at $28.40 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 1,214,230 shares. If we get that breakout, then FRAN will set up to re-test or possibly take out its next major overhead resistance levels at $30.94 to $32.04 a share. Any move above $32.04 will then put $34 into focus for shares of FRAN.
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