My first earnings short-squeeze trade idea is online travel player TripAdvisor(TRIP), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect TripAdvisor to report revenue of $167.05 million on earnings of 27 cents per share.
Just recently, a Piper Jaffray analyst said TripAdvisor is well-positioned for multiyear growth in online travel and spending. The analyst said the company will continue to be able to capture share from other travel ad channels and that its proprietary content, such as user-generated reviews, will continue to be a differentiator for the site.
The current short interest as a percentage of the float for TripAdvisor is pretty high at 10.2%. That means that out of the 98.75 million shares in the tradable float, 12.16 million shares are sold short by the bears. If TripAdvisor can deliver a strong quarter and bullish guidance, then this stock has a solid chance of seeing a large short-squeeze post-earnings.
From a technical perspective, TRIP 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 three months, with shares soaring from its low of $28.63 to its recent high of $49.35 a share. During that uptrend, shares of TRIP have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of TRIP within range of triggering a major breakout trade post-earnings.
If you're bullish on TRIP, 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 at $49.35 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 2.2 million shares. If that breakout hits, then TRIP will set up to enter new 52-week high territory, which is bullish price action. Some possible upside targets off that breakout are $60 to $65 a share.
I would simply avoid TRIP or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 50-day moving average of $43.40 a share with heavy volume. If we get that move, then TRIP will set up to re-test or possibly take out its next major support levels at $42.77 to $41.48 a share. Any high-volume move below $41.48 will then put its 200-day moving average of $39.33 into range for shares of TRIP.
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and
strategies to help you become a well-seasoned trader.
100+ monthly options trading ideas
Actionable options commentary & news
Real-time trading community
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.