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My first earnings short-squeeze trade idea is electric car maker Tesla Motors (TSLA), which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Tesla Motors to report revenue of $534.54 million on earnings of 11 cents per share.
Just recently, Craig Irwin of Wedbush Securities upgraded shares of Tesla to outperform from neutral and raised his price target to $240 from $180 per share. "Tesla's not positioned to disappoint anytime soon. These guys are going to keep executing, keep making expectations for the foreseeable future," he said on CNBC's "Fast Money."
The current short interest as a percentage of the float Tesla Motors is extremely high at 26.1%. That means that out of the 77.88 million shares in the tradable float, 20.81 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of TSLA could easily explode to the upside post-earnings as the bears rush to cover some of their bets.
From a technical perspective, TSLA is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending for the last few weeks, with shares moving higher from its low of $153 to its intraday high of $181.43 a share. During that move, shares of TSLA have been making mostly higher lows and higher highs, which is bullish technical price action.
If you're bullish on TSLA, then I would wait until after its report and look for long-biased trades if this stock manages to take out Tuesday's high of $181.43 to some more key overhead resistance at $185 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 10.73 million shares. If we get that move, then TSLA will set up to re-test or possibly take out its next major overhead resistance levels at $188.79 to its all-time high at $194.50 a share. Any high-volume move above those levels will then give TSLA a chance to trend north of $200 a share.
I would simply avoid TSLA or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 50-day moving average at $173.53 (or below Tuesday's intraday low if lower) with high volume. If we get that move, then TSLA will set up to re-test or possibly take out its next major support areas at $160 to $153 a share. Any high-volume move below $153 will then give TSLA a chance to trend well below $150 a share.
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