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TheStreet Open House

5 Earnings Stocks Everyone Hates -- but You Should Love

SolarCity

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One potential earnings short-squeeze candidate is solar energy player SolarCity (SCTY), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect SolarCity to report revenue of $27.44 million on a loss of 38 cents per share.

>>4 Big Stocks on Traders' Radars

The current short interest as a percentage of the float for SolarCity is pretty high at 15.9%. That means that out of the 31.84 million shares in the tradable float, 4.61 million shares are sold short by the bears. This is a high short interest on a stock with a relatively low tradable float. If the bulls get the earnings news they're looking for, then shares of SCTY could explode higher post-earnings as the bears rush to cover some of their short bets.

From a technical perspective, SCTY is currently trending above its 50-day moving average, which is bullish. This stock is ripping higher today right off it 50-day with strong upside volume. This move has started to push shares of SCTY into breakout territory, since the stock has cleared some near-term overhead resistance at $44.98 a share. That move is quickly pushing shares of SCTY within range of triggering another major breakout trade post-earnings.

If you're bullish on SCTY, 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 $46 to $50 a share and then once it clears its all-time high at $52.77 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 2.64 million shares. If that breakout hits, then SCTY will set up to enter new all-time high territory, which is bullish technical price action. Some possible upside targets off that breakout are $60 to $65 a share.

I would avoid SCTY 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 at $39.90 a share and then below more near-term support at $38.80 share with high volume. If we get that move, then SCTY will set up to re-test or possibly take out its next major support levels at $37.30 a share to $32.66 a share.

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