This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

5 Earnings Short-Squeeze Plays

Lululemon Athletica

Another potential earnings short-squeeze trade idea is designer and retailer of technical athletic apparel Lululemon Athletica (LULU - Get Report), which is set to release its numbers on Thursday before the market open. Wall Street analysts, on average, expect Lululemon Athletica to report revenue $343.10 million on earnings of 35 cents per share.

Just recently, Citi analyst Oliver Chen started coverage on shares of Lululemon Athletica with a buy rating and a $90 per share price target. He said the company's sales productivity is at $2,000 per square foot, vs. Michael Kors at $1,500, Coach at $1,800 and Tumi that is above $1,200. Chen thinks Lululemon ales can reach $3,000 per square foot, as LULU gains brand recognition and expands from current 60% penetration in the U.S.

The current short interest as a percentage of the float for Lululemon Athletica is extremely high at 20%. That means that out of the 133.71 million shares in the tradable float, 20.81 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 7.5%, or by about 1.45 million shares. If the bears get caught pressing their bets into a bullish quarter, then shares of LULU could explode higher post-earnings as the bears rush to cover some of their short bets.

From a technical perspective, LULU is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock has been trending sideways for the last month and change, with shares moving between $74.75 on the upside and $67.70 on the downside. A high-volume move above the upper-end of its recent range could trigger a big breakout trade for LULU post-earnings.

If you're in the bull camp on LULU, then I would wait until after its report and look for long-biased trades if this manages to break out above some near-term overhead resistance levels at $72.71 to $72.82 a share and then once it clears more resistance at $74.75 a share high volume. Look for volume on that move that hits near or above its three-month average action of 3.34 million shares. If that breakout triggers, then LULU will set up to re-fill some of its previous gap down zone from June that started at $82.50 a share.

I would simply avoid LULU or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 50-day at $69.29 a share and then once it takes out more key near-term support at $68.50 to $67.60 a share with high volume. If we get that move, then LULU will set up to re-test or possibly take out its next major support levels a $63 to $62 a share.
3 of 6

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
NTWK $5.57 0.00%
LULU $52.50 0.00%
MW $20.65 0.00%
UNFI $45.02 0.00%
ULTA $170.98 0.00%


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs