I would simply avoid GMCR 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 $60 to $56.87 a share with high volume. If we get that move, then GMCR will set up to re-test or possibly take out its next major support levels at $50 to $45 a share.
Another potential earnings short-squeeze trade idea is department store player
), which is set to release its numbers on Wednesday before the market open. Wall Street analysts, on average, expect J.C. Penney to report revenue $2.80 billion on a loss of $1.72 per share.
Just recently, Gilford Securities analyst Bernard Sosnick said that he believes a 10% to 15% same-store sales gain will be achieved in the fourth quarter of 2013. If so, the firm would anticipate a rally for shares of JCP.
The current short interest as a percentage of the float for J.C. Penney is extremely high at 26.2%. That means that out of the 162.21 million shares in the tradable float, 79.05 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 3%, or by about 2.29 million shares. If the bears get caught pressing their bets into a strong quarter, then shares of JCP could experience a big short-squeeze post-earnings as the shorts rush to cover some of their bets.
From a technical perspective, JCP is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending for the last month, with shares moving higher from its low of $6.24 to its recent high of $9.32 a share. During that uptrend, shares of JCP have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of JCP within range of triggering a major breakout trade post-earnings.
If you're in the bull camp on JCP, 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 $9.32 to $10 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 39.49 million shares. If that breakout hits, then JCP will set up to re-test or possibly take out its next major overhead resistance levels at $12 to $14.50 a share.