From a technical perspective, DRI is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down big from around $53 a share to below $47 a share with heavy volume. Following that gap down, shares of DRI went on to print a new low of $45.26 a share. Shares of DRI have since then started to rebound and approach a near-term breakout trade back above its gap down day high.
If you're bullish on DRI, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its gap down day high of $48.58 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 1,516,740 shares. If that breakout triggers, then DRI will set up to re-fill some of that previous gap that started near $53 a share.
I would avoid DRI or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its recent low print of $45.26 a share with high volume. If we get that move, then DRI will set up to re-test or possibly take out its next major support levels at $42 to $40.15 a share.
Winnebago IndustriesAnother earnings short-squeeze trade idea is Winnebago Industries (WGO - Get Report), which is set to release numbers on Thursday before the market open. This is manufacturer of motor homes which are self-contained recreation vehicles used mainly in leisure travel and outdoor recreation activities. Wall Street analysts, on average, expect Winnebago Industries to report revenue of $155.29 million on earnings of 10 cents per share. If you're looking for a heavily-shorted stock that's been uptrending very strong heading into its earnings report, then make sure to check out shares of Winnebago Industries. This stock has been trending very hot so far in 2012, with shares up a whopping 93%. The current short interest as a percentage of the float for Winnebago Industries is notable at 6.4%. That means that out of the 27.99 million shares in the tradable float, 1.80 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 7.2%, or by about 121,000 shares. This isn't a huge short interest, but it's more than enough to spark a decent short-covering rally if the bulls get the earnings news they're looking for.