My first earnings short-squeeze play is cloud-based on-demand software solutions provider E2open (EOPN), which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect E2open to report revenue of $18.41 million on a loss of 19 cents per share.
The current short interest as a percentage of the float E2open is very high at 16%. That means that out of the 12.50 million shares in the tradable float, 2.20 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 1.6%, or by around 34,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of EOPN could easily soar higher post-earnings as the bears rush to cover some of their bets.
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From a technical perspective, EOPN is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending for the last six month, with shares moving higher from its low of $16.80 to its recent high of $26.40 a share. During that uptrend, shares of EOPN have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of EOPN within range of triggering a near-term breakout trade post-earnings.
If youre bullish on EOPN, 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 $25 to its all-time-high at $26.40 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 151,040 shares. If that breakout triggers, then EOPN will set up to enter new all-time-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $35 to $37 a share.
I would simply avoid EOPN 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 of $22.88 a share with high volume. If we get that move, then EOPN will set up to re-test or possibly take out its next major support levels at its 200-day moving average of $19.65 to $18.54 a share.