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 trade idea is Navistar International (NAV - Get Report), which is set to release numbers on Wednesday before the market open. This company produces International brand commercial and military trucks, MaxxForce brand diesel engines, IC Bus brand school and commercial buses, Monaco RV brands of recreational vehicles, and Workhorse brand chassis. Wall Street analysts, on average, expect Navistar International to report revenue of $3.18 billion on a loss of $1.12 per share.If you're looking for a heavily-shorted stock that's been beaten-down heading into its earnings report, then make sure to check out shares of Navistar International. This stock has been hammered by the bears so far in 2012, with shares off by a whopping 41%. The current short interest as a percentage of the float for Navistar International is rather high at 16%. That means that out of the 57.62 million shares in the tradable float, 12.58 million shares are sold short by the bears. Any bullish earnings news could easily spark a massive short-squeeze for shares of NAV post-earnings. From a technical perspective, NAV 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 uptrending modestly for the last two months, with shares trading higher from a low of $18.17 a share to its recent high of $22.61 a share. During that uptrend, shares of NAV have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed NAV within range of triggering a near-term breakout trade post-earnings. If you're bullish on NAV, 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 $22.61 to $23.47 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 1,951,720 shares. If that breakout hits, then NAV will set up to re-test or possibly take out its next major overhead resistance levels at $26.38 a share to its 200-day at $27.08 a share.
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