My first earnings short-squeeze play is global provider of print and related products and services for marketers and publishers Quad Graphics (QUAD), which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Quad Graphics to report revenue of $1.15 billion on earnings of 15 cents per share.
The current short interest as a percentage of the float for Quad Graphics is extremely high at 28.4%. That means that out of the 25.91 million shares in the tradable float, 6.39 million shares are sold short by the bears. This is a stock with a very high short interest and a relatively low tradable float. Any bullish earnings news could easily set off a large short-squeeze for shares of QUAD post-earnings.
From a technical perspective, QUAD is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been downtrending for the last month and change, with shares dropping from its high of $24.59 to its recent low of $19.60 a share. During that move, shares of QUAD have been making lower highs and lower lows, which is bearish technical price action. That said, shares of QUAD have recently started to bounce right above its 200-day moving average and it's now quickly moving within range of triggering a near-term breakout trade post-earnings.
If you're bullish on QUAD, 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 $21.66 a share and then once it clears its 50-day at $22.30 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 159,000 shares. If that breakout triggers, then QUAD will set up to re-test or possibly take out its next major overhead resistance levels at $23.50 to $24.59 a share. Any high-volume move above $24.59 could then send shares of QUAD towards $30 a share.
I would simply avoid QUAD 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 $19.60 to its 200-day at $19 a share with high volume. If we get that move, then QUAD will set up to re-test or possibly take out its next major support levels at $17.50 to $15 a share.
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.