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5 Heavily-Shorted Stocks Set to Report

>>5 Big Stock Charts You Need to See

With that in mind, here's a look at several stocks that could experience big short squeezes when they report earnings this week.

Supervalu

My first earnings short-squeeze play is Supervalu (SVU), which is set to release numbers on Thursday before the market open. This company operates as a grocery retailer in the United States. Wall Street analysts, on average, expect Supervalu to report revenue of $7.90 billion on earnings of 6 cents per share.

This company has missed Wall Street estimates in the last two quarters. During the second quarter, it missed estimates by 12 cents per share and in the first quarter it missed estimates by 19 cents per share. Supervalu has registered four straight quarters of revenue decreases going into this quarter.

The current short interest as a percentage of the float for Supervalu is extremely high at 40.5%. That means that out of the 212.07 million shares in the tradable float, 85.56 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 1.6%, or by about 1.37 million shares. If the bears are caught leaning too hard into this quarter, then we could see a short-covering rally develop post-earnings.

From a technical perspective, SVU is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been trending sideways during the last two months, with shares moving between $3.30 on the upside and $2.34 on the downside. A move outside of that range post-earnings will likely lead to the next major trend for shares of SVU.

If you're bullish on SVU, 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 $3.15 to $3.30 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 6,493,510 shares. If that breakout triggers, then SVU will set up to re-fill its previous gap down zone from last July that started above $5 a share.

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