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5 Earnings Short-Squeeze Plays

NetSol Technologies

One potential earnings short-squeeze candidate is information technology and enterprise application solutions provider NetSol Technologies (NTWK - Get Report), which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect NetSol Technologies to report revenue of $13.53 million on earnings of 22 cents per share.

The current short interest as a percentage of the float for NetSol Technologies is not able at 5.4%. That means that out of the 6.70 million shares in the tradable float, 433,000 shares are sold short by the bears. This is a decent short interest on a stock with a relatively low float. Any bullish earnings news could easily spark a sharp short-covering rally for shares of NTWK post-earnings.

From a technical perspective, NTWK is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock recently started to bounce higher right off its 200-day moving average of $9.72 a share. That bounce is quickly moving shares of NTWK within range of triggering a breakout trade above a key downtrend line.

If you're bullish on NTWK, 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 at $10.29 a share and then once it clears more key resistance levels at $10.73 to $11.05 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 115,286 shares. If that breakout hits, then NTWK will set up to re-test or possibly take out its next major overhead resistance levels at $13 to its 52-week high at $14 a share.

I would avoid NTWK or look for short-biased trades if after earnings it fails to trigger that move, and then drops back below some key near-term support levels at its 200-day at $9.72 a share to $9.70 a share and then below more support at $9.57 a share with high volume. If we get that move, then NTWK will set up to re-test or possibly take out its next major support levels at $8.73 to $7 a share.
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