5 Stocks Facing an Earnings Short Squeeze

I would simply avoid PIR or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below some near-term support levels at $18.79 to $18.05 a share with heavy volume. If we get that move, then PIR will set up to re-test or possibly take out its next major support level at its 200-day moving average of $17.78 a share.

Ciena

One potential earnings short-squeeze candidate is Ciena (CIEN), which is set to release numbers on Thursday before the market open. This is a provider of equipment, software and service solutions that support the transport, switching, aggregation and management of voice, video and data traffic on communications networks. Wall Street analysts, on average, expect Ciena to report revenue of $468.43 million on a loss of 6 cents per share.

The current short interest as a percentage of the float for Ciena is extremely high at 22.1%. That means that out of the 98.24 million shares in the tradable float, 21.57 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then CIEN could rip higher post-earnings as the bears rush to cover some of their short positions.

From a technical perspective, CIEN is currently trending just above both its 50-day and 200-day day moving averages, which is bullish. This stock has been uptrending strong for the last month and change, with shares soaring from a low of $11.95 to today's intraday high of $15.96 a share. During that uptrend, shares of CIEN have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of CIEN within range of triggering a major breakout trade post-earnings.

If you're bullish on CIEN, then I would wait until after its report and look for long-biased trades once this stock breaks out above some near-term overhead resistance levels at $17.26 to $17.85 a share, and then above more overhead resistance at $18.39 to $18.79 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 3,423,520 shares. If that breakout hits, then CIEN will set up to re-test or possibly take out its next major overhead resistance levels at $22 to $24 a share.

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