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My final earnings short-squeeze trade idea to check out is quick service restaurant player
Chipotle Mexican Grill (
CMG), which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Chipotle Mexican Grill to report revenue of $802.70 million on earnings of $2.81 per share.
Just recently, research firm Buckingham said Chipotle Mexican Grill faces a variety of headwinds, including slowing comparative increases and labor cost pressures. The firm thinks comparative store sales will rise 3.4% in the second quarter, down sharply from 8% during the same period in 2012.
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The current short interest as a percentage of the float for Chipotle Mexican Grill stands is pretty high at 9.1%. That means that out of the 30.40 million shares in the tradable float, 2.76 million shares are sold short by the bears. This is a decent short interest on a stock with relatively low tradable float. Any bullish earnings news could easily spark a solid short-covering rally for shares of CMG post-earnings.
From a technical perspective, CMG 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 six months, with shares soaring higher from its low of $290 to its recent high of $389.84 a share. During that uptrend, shares of CMG have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of CMG within range of triggering a near-term breakout trade.
If you're in the bull camp on CMG, 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 $387.49 to $389.84 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 444,013 shares. If that breakout triggers, then CMG will set up to re-test or possibly take out its 52-week high at $404.59 a share. Any high-volume move above that level will then put its next major resistance level at $419.69 into range for shares of CMG.
I would avoid CMG or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 50-day at $369.89 a share with high volume. If we get that move, then CMG will set up to re-test or possibly take out its next major support levels at $352.27 to $350.66 a share. Any high-volume move below those levels will then put its next major support levels at $330 to $327.28 into range for shares of CMG.
To see more potential earnings short squeeze plays, check out the
Earnings Short Squeeze Plays portfolio on Stockpickr.
-- Written by Roberto Pedone in Delafield, Wis.