My first earnings short-squeeze trade idea is semiconductor player Linear Technology (LLTC - Get Report), which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Linear Technology to report revenue of $334.79 million on earnings of 45 cents per share.
The current short interest as a percentage of the float for Linear Technology is notable at 4.3%. That means that out of the 231.53 million shares in the tradable float, 9.98 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 579,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of LLTC could easily rip sharply higher post-earnings as the bears rush to cover some of their short positions.
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From a technical perspective, LLTC 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 three months and change, with shares moving higher from its low of $38.04 to its recent high of $47.55 a share. During that move, shares of LLTC have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of LLTC within range of triggering a near-term breakout trade post-earnings.
If you're bullish on LLTC, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 52-week high at $47.55 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 1.98 million shares. If that breakout hits, then LLTC will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $55 to $60 a share.
I would simply avoid LLTC 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 $44.41 a share to its 50-day moving average of $43.21 a share with high volume. If we get that move, then LLTC will set up to re-test or possibly take out its next major support levels at $40 to its 200-day moving average of $39.20 a share.