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Another potential earnings short-squeeze trade is restaurant owner and operator
Buffalo Wild Wings(BWLD - Get Report), which is set to release its numbers on Tuesday after the market close. Wall Street analysts, on average, expect Buffalo Wild Wings to report revenue of $291.96 million on earnings of 95 cents per share.
Just recently, KeyBanc upgraded shares of Buffalo Wild Wings to buy from hold citing that several risks are already priced into the stock and valuation is compelling. The firm said that shares already reflect investors' fears that the company will report lower-than-expected 2013 earnings per share due to rising chicken wing prices. KeyBanc has an $85 price target on the stock, and doesn't expect the company to lower its 2013 earnings per share guidance.
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The current short interest as a percentage of the float for Buffalo Wild Wings is very high at 19.8%. That means that out of the 18.36 million shares in the tradable float, 3.62 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 4.7%, or by about 160,000 shares. If the bears are caught leaning too hard into a strong number, then shares of BWLD could rip higher post-earnings.
From a technical perspective, BWLD is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock has been uptrending strong for the last two months and change, with shares moving higher from its low o $69.72 to its recent high of $78.46 a share. During that uptrend, shares of BWLD have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of BWLD within range of triggering a near-term breakout trade post-earnings.
If you're in the bull camp on BWLD, 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 $78.02 to $78.46 a share and then once it clears its 200-day at $79.32 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 405,881 shares. If that breakout triggers, then BWLD will set up to re-fill some of its previous gap down zone from last October that started near $86 a share. Any high-volume move above $86 will then put $88 to $89.80 into range for shares of BWLD.
I would simply avoid BWLD or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 50-day at $74.70 a share with high volume. If we get that move, then BWLD will set up to re-test or possibly take out its next major support levels at $72.75 to $72.70 a share. Any high-volume move below those levels will then put $69.80 to $69.72 into range for shares of BWLD.