5 Stocks Facing an Earnings Short Squeeze

>>5 Stocks Insiders are Stashing

With that in mind, here's a look at several stocks that could experience big short squeezes when they report earnings this week.

Casey's General Stores

My first earnings short-squeeze trade idea is Casey's General Stores (CASY), which is set to release numbers on Monday after the market close. This company operates convenience stores under the name 'Casey's General Store', 'HandiMart' and 'Just Diesel' in nine Midwestern states, mainly Iowa, Missouri, and Illinois. Wall Street analysts, on average, expect Casey's General Stores to report revenue of $1.91 billion on earnings of 85 cents per share.

The current short interest as a percentage of the float for Casey's General Stores is notable at 4.7%. That means that out of the 38.03 million shares in the tradable float, 1.79 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 7.2%, or by about 120,000 shares. If the bears are caught pressing their bets into the quarter, then we could easily see a decent short-squeeze develop post-earnings.

From a technical perspective, CASY is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending for the last three months, with shares dropping from its high of $59.95 to a recent low of $46.15 a share. During that move, shares of CASY have been mostly making lower highs and lower lows, which is bearish technical price action. That said, shares of CASY have recently started to rebound off that $46.15 low and move within range of triggering a near-term breakout trade. If you're bullish on CASY, 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 $51 to $51.64 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 299,797 shares. If we get that breakout, then CASY will set up to re-test or possibly take out its 200-day moving average of $54.96 a share.

I would simply avoid CASY or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below some near-term support at $48 a share with high volume. If we get that move, then CASY will set up to re-test or possibly take out its next major support level at $46.15 a share. Any move below $46.15 a share will then push shares of CASY into 52-week low territory, which is bearish technical price action.

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