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5 Earnings Short-Squeeze Plays

Stocks in this article: VRA RH OXM CWTR PBY

I would simply avoid VRA or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back its 52-week low at $18.67 a share (or its intraday low Wednesday if lower) with high volume. If we get that move, then VRA will set up to enter new 52-week low territory, which is bearish technical price action. Some possible targets if we get that move are $16 to $15 a share.

Restoration Hardware

Another potential earnings short-squeeze trade is home furnishings retailer Restoration Hardware (RH), which is set to release its numbers Tuesday after the market close. Wall Street analysts, on average, expect Restoration Hardware to report revenue of $377.60 million on earnings of 43 cents per share.

Just recently, Janney Capital initiated shares of Restoration Hardware with a buy rating and a price target of $82 per share.

The current short interest as a percentage of the float for Restoration Hardware is pretty high at 10.6%. That means that out of the 34.27 million shares in the tradable float, 2.55 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 11.7%, or by about 267,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of RH could experience a big short-squeeze post-earnings.

From a technical perspective, RH 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 month and change, with shares moving higher from its low of $63.81 to its intraday high of $78.29 a share. During that move, shares of RH have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of RH into news 52-week high territory, which is bullish technical price action.

If you're in the bull camp on RH, then I would wait until after its report and look for long-biased trades if this stock manages to take out its all-time high of $78.29 a share (or its intraday high Tuesday if greater) with high volume. Look for volume on that move that hits near or above its three-month average action of 656,881 shares. If that breakout triggers, then RH will set up to enter new all-time high territory, which is bullish technical price action. Some possible upside targets off that move are $85 to $90 a share.

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