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One potential earnings short-squeeze candidate is biotechnology and drugs player
Cubist Pharmaceuticals(CBST), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Cubist Pharmaceuticals to report revenue of $246.42 million on earnings of 48 cent per share.
During the last quarter, this company reported a profit of 68 cents per share. This company has beaten Wall Street estimates for the last three quarters in a row. Cubist Pharmaceuticals has averaged year-over-year revenue growth of 27.6% over the last four quarters.
The current short interest as a percentage of the float for Cubist Pharmaceuticals is pretty high at 13.8%. That means that out of the 64.11 million shares in the tradable float, 8.86 million shares are sold short by the bears. Any bullish earnings news could easily spark a monster short-squeeze for shares of CBST post-earnings.
From a technical perspective, CBST is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last two months, with shares moving higher from its low of $38.53 to its recent high of $44.95 a share. During that uptrend, shares of CBST have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed CBST within range of triggering a breakout trade post-earnings.
If you're bullish on CBST, 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 $44 to $44.95 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 753,197 shares. If that breakout triggers, then CBST will set up to re-test or possibly take out its next major overhead resistance levels at $48.30 to $49.86 a share.
I would avoid CBST or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below some key near-term support levels at $42.80 to $41.35 a share with high volume. If we get that move, the CBST will be trading back below both its 50-day and 200-day moving averages. Some possible downside targets off that move are $39 to $38.53 a share.