My first earnings short-squeeze play is patented technologies player Acacia Research (ACTG - Get Report), which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Acacia Research to report revenue $16.92 million on earnings of 4 cents per share.
The current short interest as a percentage of the float for Acacia Research is extremely high at 20.3%. That means that out of the 49.75 million shares in the tradable float, 10.01 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 5.5%, or by about 520,000 shares. If the bears get caught pressing their bets into a bullish quarter, then shares of ACTG could easily rip sharply higher post-earnings as the bears jump to cover some of their trades.
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From a technical perspective, ACTG is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been uptrending strong for the last four months, with shares moving higher from its low of $12.13 to its recent high of $18.29 a share. During that uptrend, shares of ACTG have been making mostly higher lows and higher highs, which is bullish technical price action. Shares of ACTG are now pulling back to its 50-day moving average, and if that level holds, the stock could be setting up to run higher post-earnings.
If you're bullish on ACTG, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 200-day at $17.51 and then once it takes out more near-term overhead resistance at $18.29 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 673,777 shares. If that breakout triggers post-earnings, then ACTG will set up to re-fill its previous gap-down-day zone from last October that started just above $20 a share. If that gap gets filled with strong upside volume flows, then ACTG will set up to tag $23 to $25 a share.
I would simply avoid ACTG 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 at $15.14 a share to more near-term support levels at $14.38 to $14.12 a share with high volume. If we get that move, then ACTG will set up to re-test or possibly take out its next major support levels at $13.14 to $13.01 a share, or even its 52-week low at $12.23 a share.