Dave & Busters and 4 Other Heavily Shorted Stocks Could Explode After They Report Earnings
Stock market bears hate being caught short a stock that releases an upbeat earnings report. When this happens, we often see a tradable short squeeze develop as the bears scramble to cover their positions. Even the best short-sellers know, it's never smart to get caught short once a bullish earnings report kicks off a sharp short-covering rally.
This is why I scan the market every week for heavily shorted stocks that are due to report earnings. You only need to find a few of these plays every week to help enhance your returns.
With that in mind, here's a look at five:
Navistar
My first earnings short-squeeze trade idea is industrial goods player Navistar (NAV) , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Navistar to report revenue of $2.05 billion on a loss of 5 cents per share.
The current short interest as a percentage of the float for Navistar is pretty high at 14.3%. That means that out of the 48.05 million shares in the tradable float, 6.88 million shares are sold short by the bears.
I would wait until after Navistar reports, and then look for long-biased trades if this stock manages to break out above a key downtrend line over $28.03 to $28.17 with volume that hits near or above 583,034 shares. If that breakout hits post-earnings, then this stock will set up to make a run at its 52-week high of $33.46 to $35 a share.
Meanwhile, Jim Cramer talks about oversold retail stocks on Real Money. Get his insights or analysis with a free trial subscription to Real Money.
Dave & Buster's
Another potential earnings short-squeeze trading opportunity is entertainment and dining venues operator Dave & Buster's (PLAY) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Dave & Buster's to report revenue of $299.85 million on earnings of 81 cents per share.
The current short interest as a percentage of the float for Dave & Buster's is rather high, at 10.9%. That means that out of the 41.42 million shares in the tradable float, 4.54 million shares are sold short by the bears.
I would wait until after Dave & Buster's reports, and then look for long-biased trades if this stock manages to break out above its all-time high of $69.42 with volume that hits near or above 725,169 shares. If that breakout develops post-earnings, this stock will set up to make a run at $75 to $80, or even $85 a share.
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G-III Apparel Group
One potential earnings short-squeeze candidate is apparel player G-III Apparel Group (GIII) , which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect G-III Apparel Group to report revenue of $497.88 million on a loss of 40 cents per share.
The current short interest as a percentage of the float for G-III Apparel Group is very high at 23.4%. That means that out of the 41.49 million shares in the tradable float, 9.71 million shares are sold short by the bears.
I would wait until after G-III Apparel Group reports, and then look for long-biased trades if this stock manages to break out above some near-term resistance levels at $20.23 to $20.80 and over its 20-day at $20.84 with volume that hits near or above 979,600 shares. If that breakout fires off post-earnings, this stock will set up to make a run at its 50-day of $22.34 to $25, or even $27 a share.
Calavo Growers
Another earnings short-squeeze prospect is farm products player Calavo Growers (CVGW) , which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect Calavo Growers to report revenue of $248.46 million on earnings of 66 cents per share.
The current short interest as a percentage of the float for Calavo Growers is extremely high at 26.9%. That means that out of the 15.32 million shares in the tradable float, 4.12 million shares are sold short by the bear.
I would wait until after Calavo Growers reports, and then look for long-biased trades if this stock manages to break out above some key resistance levels at $70.80 to its 52-week high of $71.48 with volume that hits near or above 205,806 shares. If that breakout triggers post-earnings, this stock will set up to make a run at $75 to $80, or even $85 a share.
Tailored Brands
My final earnings short-squeeze play is specialty apparel retailer Tailored Brands (TLRD) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Tailored Brands to report revenue of $793.28 million on earnings of 19 cents per share.
The current short interest as a percentage of the float for Tailored Brands is very high at 26.1%. That means that out of the 45.76 million shares in the tradable float, 12.65 million shares are sold short by the bears.
I would wait until after Tailored Brands reports, then look for long-biased trades if this stock manages to break out above some near-term resistance levels at $11 to $11.09 and then over its 20-day at $11.17 with volume that hits near or above 1.75 million shares. If that breakout develops post-earnings, this stock will set up to make a run at its 50-day of $12.43 to $13.24, or even $14.35 a share.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.
