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5 Hated Earnings Stocks You Should Love

Stocks in this article: AYI STZ GBX ISCA SHLM

Constellation Brands

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Another potential earnings short-squeeze play is producer and marketer of beverage alcohol products Constellation Brands ( STZ), which is set to release its numbers on Tuesday before the market open. Wall Street analysts, on average, expect Constellation Brands to report revenue of $674.24 million on earnings of 41 cents per share.

During the last quarter, this company reported revenue of $696 million and GAAP reported sales were 11% higher than the prior-year quarter's $628.1 million. Also in the last quarter, non-GAAP EPS was 47 cents per share and GAAP EPS was 44 cents per share, which was 14% lower than the prior-year quarter's 51 cents per share.

>>4 Big Stocks on Traders' Radars

The current short interest as a percentage of the float for Constellation Brands sits at 4.1%. That means that out of the 154.20 million shares in the tradable float, 6.38 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 16.5%, or by about 906,000 shares. If the bears are caught pressing their bets into a bullish quarter, then shares of STZ could spike sharply higher post-earnings as the shorts rush to cover some of their positions.

From a technical perspective, STZ is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has just started to bounce higher off its 50-day moving average of $51.08 a share, after pulling back from its recent high of $54.64 a share. That bounce is quickly pushing shares of STZ within range of triggering a major breakout trade post-earnings.

If you're in the bull camp on STZ, 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 $53.62 to its 52-week high at $54.64 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 2.26 million shares. If that breakout triggers, then STZ will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $60 to $65, or even $70 a share.

I would simply avoid STZ 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 $51.08 a share and then below some key near-term support at $49.09 a share with high volume. If we get that move, then STZ will set up to re-test or possibly take out its 200-day moving average at $41.50 a share.

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