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5 Heavily-Shorted Stocks About to Report Earnings

I would simply avoid RIMM 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 $12 to $11.25 a share with high volume. If we get that move, then RIMM will set up to re-test or possibly take out its 200-day at $9.89 a share or its 50-day at $9.75 a share.

KB Home

Another potential earnings short-squeeze trade idea is KB Home (KBH - Get Report), which is set to release its numbers on Thursday before the market open. This company constructs and sells homes through its operating divisions across the United States under the name KB Home. Wall Street analysts, on average, expect KB Home to report revenue of $567.06 million on earnings of 6 cents per share.

This company is looking to beat Wall Street estimates for the third straight quarter in a row. During the last quarter, KB Home reported a net loss of 10 cents per share versus Wall Street estimates of a loss of 17 cents per share, and in the quarter before that, the company topped estimates by 5 cents with a net loss of 31 cents per share versus Wall Street estimates of a loss of 36 cents per share.

The current short interest as a percentage of the float for KB Home is extremely high at 34.4%. That means that out of the 65.63 million shares in the tradable float, 22.59 million shares are sold short by the bears. This is a large short interest on a stock with a relatively low float. Any bullish earnings news could easily spark a sizable short-squeeze for shares of KBH.

From a technical perspective, KBH is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending for the last month and change, with shares moving higher from a low of $13.09 to its recent high of $16.70 a share. During that uptrend, shares of KBH have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed KBH within range of triggering a major breakout trade post-earnings.
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