My final earnings short-squeeze play is semiconductors player Plexus (PLXS - Get Report), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Plexus to report revenue of $536.04 million on earnings of 61 cents per share.
Just this morning, Raymond James downgraded shares of Plexus to sell citing lack of catalysts to drive higher earnings estimates. The firm sees downside risk to the mid-to-high $30s.
The current short interest as a percentage of the float for Plexus sits at 2%. That means that out of the 33.39 million shares in the tradable float, 656,000 shares are sold short by the bears. This is by no means a large short interest, but it's more than enough to spark a solid short-covering rally post-earnings of Plexus can deliver the earnings news the bulls are looking for.
From a technical perspective, PLXS 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 six months, with shares moving higher from its low of just under $31 to its recent high of $44.16 a share. During that uptrend, shares of PLXS have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of PLXS within range of triggering a big breakout trade post-earnings.
If you're in the bull camp on PLXS, then I would wait until after its report and look for long-biased trades if this stock manages to break out above Monday's intraday high of $42.30 a share to its 52-week high at $44.16 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 170,062 shares. If that breakout hits, then PLXS will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $50 to $55, or even $60 a share.
I would avoid PLXS 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 $40.67 a share with high volume. If we get that move, then PLXS will set up to re-test or possibly take out its next major support levels at $39 to $38 a share. Any high-volume move below those levels will then give PLXS a chance to tag $36.50 to its 200-day moving average of $34.17 a share.
To see more potential earnings short squeeze plays, check out the Earnings Short-Squeeze Plays portfolio on Stockpickr.
-- Written by Roberto Pedone in Delafield, Wis.