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TheStreet Open House

5 Earnings Short-Squeeze Plays

I would simply avoid CWTR 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 levels at $2.35 to its 52-week low at $2.16 a share with high volume. If we get that move, then CWTR will set up to enter new 52-week low territory, which is bearish technical price action. Some possible targets off that move are $1.80 to $1.78 a share.

Pep Boys - Manny, Moe & Jack

My final earnings short-squeeze play is auto shop and care for car provider Pep Boys - Manny, Moe & Jack (PBY), which is set to release numbers Tuesday after the market close. Wall Street analysts, on average, expect Pep Boys - Manny, Moe & Jack to report revenue of $539.35 million on earnings of 19 cents per share.

The current short interest as a percentage of the float for Pep Boys - Manny, Moe & Jack is notable at 5.3%. That means that out of the 49.15 million shares in the tradable float, 2.73 million shares are sold short by the bears. This is a decent short interest on a stock with relatively low float. Any bullish earnings news could easily spark a sharp short-covering rally for shares of PBY post-earnings.

From a technical perspective, PBY is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock recently pulled back from its August high of $13 to its low of $10.94 a share. Shares of PBY have now started to rebound off that $10.94 low and its moving back above its 200-day moving average at $12.08 a share. That move has pushed shares of PBY within range of triggering a near-term breakout trade.

If you're in the bull camp on PBY, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 50-day moving average at $12.08 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 236,667 shares. If that breakout hits, then PBY will set up to re-test or possibly take out its 52-week high at $13 a share. Any high-volume move above that level will then give PBY a chance to re-fill some of its previous gap down zone from mid-2012 that started at $15 a share.

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