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DELAFIELD, Wis. (Stockpickr) -- Short-sellers hate being caught short a stock that reports a blowout quarter. When this happens, we often see a tradable short squeeze develop as the bears rush to cover their positions to avoid big losses. Even the best short-sellers know that it's never a great idea to stay short once a bullish earnings report sparks a big short-covering rally.

This is why I scan the market for heavily shorted stocks that are about to report earnings. You only need to find a few of these stocks in a year to help enhance your portfolio returns -- the gains become so outsized in such a short time frame that your profits add up quickly.

That said, let's not forget that stocks are heavily shorted for a reason, so you have to use trading discipline and sound money management when playing earnings short-squeeze candidates. It's important that you don't go betting the farm on these plays and that you manage your risk accordingly. Sometimes the best play is to wait for the stock to break out following the report before you jump in to profit off a short squeeze. This way, you're letting the trend emerge after the market has digested all of the news.

Of course, sometimes the stock is going to be in such high demand that you risk missing a lot of the move by waiting. That's why it can be worth betting prior to the report -- but only if the stock is acting technically very bullish and you have a very strong conviction that it is going to rip higher. Just remember that even when you have that conviction and have done your due diligence, the stock can still get hammered if Wall Street doesn't like the numbers or guidance.

If you do decide to bet ahead of a quarter, then you might want to use options to limit your capital exposure. Heavily shorted stocks are usually the names that make the biggest post-earnings moves and have the most volatility. I personally prefer to wait until all the earnings-related news is out for a heavily shorted stock and then jump in and trade the prevailing trend.

With that in mind, let's take a look at several stocks that could experience big short squeezes when they report earnings this week.

Titan Machinery

My first earnings short-squeeze trade idea is agricultural and construction equipment stores operator Titan Machinery (TITN) - Get Titan Machinery Inc. Report, which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Titan Machinery to report revenue of $545.49 million on a loss of 19 cents per share.

The current short interest as a percentage of the float for Titan Machinery is extremely high at 22.4%. That means that out of the 16.95 million shares in the tradable float, 3.81 million shares are sold short by the bears. This is a large short interest on a stock with a very low tradable float. Any bullish earnings news could easily spark a big short-covering rally for shares of TITN post-earnings as the bears move fast to cover some of their positions.

From a technical perspective, TITN is currently trending above below both its 50-day and 200-day moving averages, which is bearish. This stock has been trending sideways over the last month or so, with shares moving between $12.56 on the downside and $13.83 on the upside. Any high-volume move above the upper-end of its recent range post-earnings will possibly trigger a near-term breakout trade for shares of TITN.

If you're bullish on TITN, 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 $13.74 to $13.83 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 118,837 shares. If that breakout triggers post-earnings, then shares of TITN will set up to re-test or possibly take out its next major overhead resistance levels at $15.50 to $16.73 a share, or even $18 a share.

I would simply avoid TITN 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 $12.50 to around $12 a share with high volume. If we get that move, then TITN will set up to re-test or possibly take out its next major support levels at $11.19 to its 52-week low of $10.69 a share.

Travelzoo

Another potential earnings short-squeeze play is Internet media player Travelzoo (TZOO) - Get Travelzoo Report, which is set to release its numbers on Thursday before the market open. Wall Street analysts, on average, expect Travelzoo to report revenue $34.77 million on earnings of 8 cents per share.

The current short interest as a percentage of the float for Travelzoo is pretty high at 8%. That means that out of the 6.53 million shares in the tradable float, 527,000 shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 7.2%, or by about 35,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of TZOO could easily jump sharply higher post-earnings as the bears scramble to cover some of their trades.

TheStreet Recommends

From a technical perspective, TZOO is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been consolidating and trending sideways over the last two months, with shares moving between $9.34 on the downside and $10.45 on the upside. Any high-volume move above the upper-end of its recent sideways trending chart pattern post-earnings could trigger a big breakout trade for shares of TZOO.

If you're in the bull camp on TZOO, 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 $10.05 to $10.45 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 120,050 shares. If that breakout kicks off post-earnings, then TZOO will set up to re-test or possibly take out its next major overhead resistance levels at $11.50 to $12 a share, or even $13 a share.

I would simply avoid TZOO 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 $9.34 to $9 a share with high volume. If we get that move, then TZOO will set up to re-test or possibly take out its next major support level at its 52-week low of $8.45 a share. Any high-volume move below that level will then give TZOO a chance to tag $8 to $7.50 a share.

Cohen & Steers

Another potential earnings short-squeeze candidate is regional banking player Cohen & Steers (CNS) - Get Cohen & Steers, Inc. Report, which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Cohen & Steers to report revenue of $80.30 million on earnings of 53 cents per share.

The current short interest as a percentage of the float for Cohen & Steers stands at 6.5%. That means that out of the 19.71 million shares in the tradable float, 1.28 million shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a decent short-covering rally for shares of CNS post-earnings if the bulls get the earnings news they're looking for.

From a technical perspective, CNS is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been consolidating and trending sideways over the last two months and change, with shares moving between $39.99 on the downside and $44.38 on the upside. If shares of CNS can manage to take out the upper-end of its recent range post-earnings, then this stock could trigger a near-term breakout trade.

If you're bullish on CNS, 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 $41.82 to $42 a share and then above more resistance at $44.38 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 119,919 shares. If that breakout materializes post-earnings, then CNS will set up to re-test or possibly take out its 52-week high of $47.16 a share. Any high-volume move above that level will then give CNS a chance to tag or take out $50 a share.

I would avoid CNS 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 $39.99 to around $38 a share with high volume. If we get that move, then CNS will set up to re-test or possibly take out its next major support levels its 52-week low of $36.93 a share to $35.69 or $33 a share.

Advanced Micro Devices

Another earnings short-squeeze prospect is semiconductor player Advanced Micro Devices (AMD) - Get Advanced Micro Devices, Inc. Report, which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Advanced Micro Devices to report revenue of $1.05 billion on a loss of 5 cents per share.

The current short interest as a percentage of the float for Advanced Micro Devices is notable at 16.3%. That means that out of 631.81 million shares in the tradable float, 103.23 million shares are sold short by the bear. The bears have also been increasing their bets from the last reporting period by 10.9%, or by about 10.13 million shares. If the bears get caught pressing their bets into a bullish quarter, then shares of AMD could easily spike sharply higher post-earnings as the bears jump to cover some of their bets.

From a technical perspective, AMD is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending a bit over the last few weeks, with shares moving higher from its low of $2.53 to its recent high of $2.80 a share. During that uptrend, shares of AMD have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of AMD within range of triggering a near-term breakout trade post-earnings above some key overhead resistance levels.

If you're bullish on AMD, 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 $2.85 a share to its 50-day moving average of $2.89 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 16.76 million shares. If that breakout develops post-earnings, then AMD will set up to re-test or possibly take out its next major overhead resistance levels at $2.98 to its 200-day moving average of $3.20 a share, or even $3.23 to $3.37 a share. This stock could possibly even tag $4 a share if all those levels get taken out with volume.

I would simply avoid AMD 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 $2.65 to $2.53 a share and then below $2.51 to around $2.40 a share high volume. If we get that move, then AMD will set up to re-test or possibly take out its next major support level at its 52-week low of $2.14 a share.

People's United Financial

My final earnings short-squeeze play is banking player People's United Financial (PBCT) - Get People's United Financial, Inc. Report, which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect People's United Financial to report revenue of $313.97 million on earnings of 20 cents per share.

The current short interest as a percentage of the float for People's United Financial is pretty high at 11.4%. That means that out of the 296.99 million shares in the tradable float, 33.85 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 2%, or by about 677,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of PBCT could easily spike sharply higher post-earnings as the bears move fast to cover some of their trades.

From a technical perspective, PBCT is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been consolidating and trending sideways over the last month and change, with shares moving between $14.81 on the downside and $15.45 on the upside. Shares of PBCT spiked higher on Monday right off its 50-day moving average of $15 a share with strong upside volume flows. That spike is now pushing shares of PBCT within range of triggering a near-term breakout trade post-earnings.

If you're in the bull camp on PBCT, 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 $15.44 to its 52-week high of $15.50 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 2.98 million shares. If that breakout gets underway post-earnings, then PBCT will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $20 to $23 a share.

I would avoid PBCT 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 $14.93 to $14.81 a share and then below its 200-day moving average of $14.57 a share with volume. If we get that move, then PBCT will set up to re-test or possibly take out its next major support levels at $13.97 to $13.81 a share, or even $13.30 a share.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.