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5 Heavily-Shorted Stocks Set to Report Earnings

Stocks in this article: HOV ADBE RH PAY ZQK

VeriFone Systems

Another earnings short-squeeze trade idea is VeriFone Systems (PAY), which is set to release numbers on Thursday after the market close. This company designs, markets, and services transaction automation systems that enable secure electronic payments among consumers, merchants, and financial institutions. Wall Street analysts, on average, expect VeriFone Systems to report revenue of $495.20 million on earnings of 76 cents per share.

This company's quarterly results have come in ahead of Wall Street estimates for the last three quarters in a row. During the last quarter, the company reported a net income of 64 cents per share versus Wall Street estimates of 61 cents per share. This company has averaged year-over-year revenue growth of 53.1% over the last four quarters.

The current short interest as a percentage of the float for VeriFone Systems is rather high at 10.9%. That means that out of the 106.07 million shares in the tradable float, 11.57 million shares are sold short by the bears. Any bullish earnings news from PAY could easily spark a large short-covering rally post-earnings.

From a technical perspective, PAY is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock has been mildly uptrending for the last two months, with shares moving higher from a low of $27.33 to its recent high of $33.93 a share. During that move, shares of PAY were mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed PAY within range of triggering a major breakout trade post-earnings.

If you're bullish on PAY, then I would wait until after its report and look for long-biased trades if this stock can manage to break out above some key overhead resistance levels at $33.93 to $35.61 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 2,818,540 shares. If that breakout triggers, then PAY will set up to re-test or possibly take out its next major overhead resistance levels at $38.04 to $39 a share.

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