I would avoid CSTR or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 200-day at $51.37 a share with high volume. If we get that move, then CSTR will set up to re-test or possibly take out its next major support levels $49.68 to $47.25 a share.
Another earnings short-squeeze prospect is fabless semiconductor player for the storage sector
), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Mellanox technologies to report revenue of $80.77 million on earnings of 4 cents per share.
A few weeks ago, Piper Jaffray raised its price target for Mellanox ahead of the company's first-quarter results and reiterated its overweight rating on the stock. Piper expects Mellanox to report revenue at the high-end of the guidance range and thinks the company is well positioned for strong growth. The firm raised its price target to $65 from $52.
The current short interest as a percentage of the float for Mellanox Technologies is extremely high at 21.6%. That means that out of the 37.11 million shares in the tradable float, 6.92 million shares are sold short by the bears. This is a high short interest low float situation, so any bullish earnings news could easily send shares of MNLX skyrocketing higher post-earnings.
From a technical perspective, MLNX is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock has been uptrending strong for the last month, with shares moving higher from its low of $51.50 to its recent high of $63.09 a share. During that uptrend, shares of MLNX have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of MLNX within range of triggering a near-term breakout trade post-earnings.
If you're bullish on MLNX, 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 $63.09 to $65.77 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 1.15 million shares. If that breakout triggers, then MLNX will set up to re-test or possibly take out its next major overhead resistance levels at $72 to its 200-day at $76.29 a share. Any high-volume move above its 200-day will then put $85 into range for shares of MLNX.