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My final earnings short-squeeze trade idea is recycler of ferrous and nonferrous scrap metal
Schnitzer Steel Industries (
SCHN), which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Schnitzer Steel Industries to report revenue of $737.76 million on earnings of 12 cents per share.
The current short interest as a percentage of the float for Schnitzer Steel Industries is pretty high at 11%. That means that out of the 24.68 million shares in the tradable float, 2.73 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of SCHN could easily experience a solid short-squeeze post-earnings.
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From a technical perspective, SCHN is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last six months, with shares dropping from its high of $30.99 to its recent low of $22.90 a share. During that move, shares of SCHN have been mostly making lower highs and lower lows, which is bearish technical price action. That said, shares of SCHN have held above its low of $22.90 off its latest pullbacks, and the stock is now starting to move within range of triggering a near-term breakout trade.
If you're in the bull camp on SCHN, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 50-day at $24.98 a share and then above more resistance at $25.23 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 309,075 shares. If we get that breakout, then SCHN will set up to re-test or possibly take out its 200-day moving average at $27.55 a share. Any high-volume move above that level will then give SCHN a chance to tag or trend north of $30 a share.
I would avoid SCHN 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 $23.41 to its 52-week low at $23.07 a share with high volume. If we get that move, then SCHN will set up to enter new 52-week-low territory, which is bearish technical price action. Some possible downside targets off that move are $20 to $18 a share.
To see more potential earnings short squeeze plays, check out the
Earnings Short Squeeze Plays portfolio on Stockpickr.
-- Written by Roberto Pedone in Madison, Wis.