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5 Stocks Facing an Earnings Short Squeeze

Stocks in this article: CASYPIRCIENJOYAVNR

Pier 1 Imports

Another potential earnings short-squeeze play is Pier 1 Imports (PIR) which is set to release its numbers on Thursday before the market open. This company is a global importer and operates as a specialty retailer of imported decorative home furnishings and gifts in the North America. Wall Street analysts, on average, expect Pier 1 Imports to report revenue of $416.56 million on earnings of 24 cents per share.

Just recently, this company said it expects profit in its fiscal third quarter to rise from a year ago despite store closings after Superstorm Sandy, as more customers visited stores and also spent more. Pier 1 Imports said that revenue at stores open at least a year jumped 7.9% in the three months through Nov. 24, or more than 9% when stripping out Sandy's effect.

The current short interest as a percentage of the float for Pier 1 Imports is pretty high at 8%. That means that out of the 90.85 million shares in the tradable float, 7.32 million shares are sold short by the bears. This is more than enough shorts involved in the stock to spark a sizeable short-squeeze if the bulls get the earnings news they're looking for.

From a technical perspective, PIR is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last five months, with shares moving from a low of $15.19 to its recent high of $21.24 a share. During that uptrend, shares of PIR have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed PIR within range of triggering a near-term breakout trade post-earnings.

If you're in the bull camp on PIR, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $20.05 to $20.25 a share, and then above more overhead resistance at $21.24 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 1,377,210 shares. If that breakout triggers, then PIR will set up to re-test or possibly take out its next major overhead resistance level at $25 a share. Keep in mind that any move above $21.24 will also push PIR into new 52-week high territory, which is bullish technical price action.

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