My final earnings short-squeeze play is computer hardware player Lexmark International (LXK - Get Report), which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect Lexmark International to report revenue of $929.45 million on earnings of $1.10 per share.
The current short interest as a percentage of the float for Lexmark International is very high at 18.7%. That means that out of the 61.25 million shares in the tradable float, 11.51 million shares are sold short by the bears. This is a high short interest on a stock with a relatively low tradable float. If the bulls get the earnings news they're looking for, then shares of LXK could easily rip sharply higher post-earnings as the bears jump to cover some of their bets.
From a technical perspective, LXK is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been trending sideways and consolidating for the last three months, with shares moving between $32.57 on the downside and $37.09 on the upside. Any high-volume move above the upper-end of its recent range post-earnings could trigger a big breakout trade for shares of LXK.
If you're in the bull camp on LXK, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 50-day moving average of $35.32 a share to some more key overhead resistance levels at $36.61 to $37.09 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 779,518 shares. If that breakout hits, then LXK will set up to re-test or possibly take out its next major overhead resistance levels at $39.35 to its 52-week high at $41.45 a share. Any high-volume move above those levels will then give LXK a chance to tag $45 a share.
I would avoid LXK or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 200-day moving average of $33.44 a share to more key near-term support levels at $32.57 to $32.43 a share with high volume. If we get that move, then LXK will set up to re-test or possibly take out its next major support levels at $28.97 to $24 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.