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One potential earnings short-squeeze candidate is semiconductor player
CREE) which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Cree to report revenue of $392.21 million on earnings of 39 cents per share.
Just recently, Canaccord Genuity upgraded shares of CREE to buy from hold and lifted its price target to $80 from $65 on better bulb costs and ongoing momentum in the industry. The firm said even though there are fierce competitors, CREE is clearly leading the pack worldwide in the solid-state lighting revolution.
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The current short interest as a percentage of the float for Cree stands at 8.9%. That means that out of the 116.73 million shares in the tradable float, 10.49 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 6.2%, or by about 608,000 shares. If the bears get caught pressing their bets into a bullish quarter, then shares of CREE could easily surge sharply higher post-earnings as the bears jump to cover some of their short positions.
From a technical perspective, CREE 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 two months, with shares moving higher from its low of $53.80 a share to its intraday high of $75.98 a share. During that uptrend, shares of CREE have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of CREE within range of triggering a big breakout trade post-earnings.
If you're bullish on CREE, 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 level at $75.98 to its 52-week high at $76 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 2.57 million shares. If that breakout hits, then CREE will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $85 to $90 a share, or even $95 a share.
I would avoid CREE or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below some near-term support levels at $72 to $70 a share with high volume. If we get that move, then CREE will set up to re-test or possibly take out its next major support levels at $67.23 to its 50-day moving average of $62.71 a share.