Another earnings short-squeeze prospect is technology-based education player K12 (LRN), which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect K12 to report revenue of $200.96 million on earnings of 3 cents per share.
The current short interest as a percentage of the float for K12 is extremely high at 18.8%. That means that out of the 26.62 million shares in the tradable float, 5.38 million shares are sold short by the bears. This is a big short interest on a stock with a very low tradable float. Any bullish earnings news could easily send shares of LRN skyrocketing higher post-earnings as the bears rush to cover some of their short bets.
From a technical perspective, LRN 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 pushing higher from its low of $19.92 to its recent high of $32.40 a share. During that uptrend, shares of LRN have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of LRN within range of triggering a big breakout trade post-earnings.
If you're bullish on LRN, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 52-week high at $32.40 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 198,859 shares. If that breakout triggers, then LRN will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are its next major overhead resistance levels at $37 to $39.74 a share.
I would simply avoid LRN 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 at $29.91 a share and then below its 50-day moving average of $29.80 a share with high volume. If we get that move, then LRN will set up to re-test or possibly take out its next major support levels at $26 to $25.84 a share. Any high-volume move below those levels will then put its 200-day at $24.36 into range for shares of LRN.
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