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TheStreet Open House

5 Earnings Short-Squeeze Plays

Stocks in this article: ULTALULUNTWKUNFIMW

United Natural Foods

Another earnings short-squeeze prospect is natural, organic and specialty foods and non-foods products distributor United Natural Foods (UNFI), which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect United Natural Foods to report revenue of $1.63 billion on earnings of 60 cents per share.

The current short interest as a percentage of the float for United Natural Foods stands at 4.1%. That means that out of the 46.94 million shares in the tradable float, 1.94 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 11.9%, or by about 206,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of UNFI could easily rip higher post-earnings as the bears rush to cover some of their bets.

From a technical perspective, UNFI is currently trending just above its 50-day moving average and well below its 200-day moving average, which is bullish. This stock has been uptrending strong for the last six months, with shares moving higher from its low of $47.20 to its recent high of $62.95 a share. During that uptrend, shares of UNFI have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of UNFI within range of triggering a big breakout trade post-earnings.

If you're bullish on UNFI, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $61 to $62.27 a share and then once it takes its 52-week high at $62.95 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 239,833 shares. If that breakout hits, then UNFI will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets off that breakout are $70 to $75 a share.

I would simply avoid UNFI 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 its 50-day of $59.27 a share and then below more key near-term support at $58.29 a share with high volume. If we get that move, then UNFI will set up to re-test or possibly take out its 200-day at $53.92 a share or more support at $51 a share.

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