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5 Earnings-Related Short-Squeeze Plays

I would simply avoid FINL or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 52-week low of $17.41 a share with high volume. If we get that move, then FINL will set up to re-test or possibly take out its next major support level at $16.16 a share.

Family Dollar Stores

Another potential earnings short-squeeze play is Family Dollar Stores (FDO), which is set to release its numbers on Thursday before the market open. This company operates more than 6,600 general merchandise retail discount stores in 44 states. Merchandise assortment includes consumables, home products, apparel accessories, seasonal and electronics. Wall Street analysts, on average, expect Family Dollar Stores to report revenue of $2.38 billion on earnings of 75 cents per share.

During the last quarter, this company reported a profit of 75 cents per share versus a mean estimate of 75 cents per share. This occurred after two consecutive quarters of topping Wall Street estimates. This company is looking to register its fifth straight quarter of revenue increases when it reports this week, and its fourth straight quarter of positive earnings.

The current short interest as a percentage of the float for Family Dollar Stores stands at 4.4%. That means that out of the 87.35 million shares in the tradable float, 4.87 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 11.6%, or by about 506,000 shares. If the bears are caught leaning too hard into this quarter, then we could see shares of FDO spike notably higher post-earnings.

From a technical perspective, FDO is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending for the last month and change, with shares dropping from a high of $72.30 to its recent low of $61.90 a share. During that downtrend, shares of FDO have been mostly making lower highs and lower lows, which is bearish technical price action. That said, shares of FDO have started to bump up against oversold territory, since its current relative strength index (RSI) reading is 33.

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