Photronics

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My first earnings short squeeze candidate is Photronics ( PLAB), which is set to report its results on Tuesday after the market close. Phototronics is a manufacturers of photomasks, which are precision photographic quartz plates containing microscopic images of electronic circuits. Wall Street analysts, on average, expect Photronics to report revenue of $131.78 million on earnings of 19 cent per share.

This stock has been absolutely hammered going into earnings, with shares dropping from a recent high of $10.13 a share to its current price of around $5.70 a share. This big drop has created a potentially oversold condition from which the stock could bounce sharply if the bulls hear what they want.

The current short interest as a percentage of the float for Photronics is a rather high 12.4%. That means that out of the 51.67 million shares in the tradable float, 7.05 million are sold short by the bears.

From a technical standpoint, shares of Photronics are trading below both its 50-day and 200-day moving averages, which is bearish. The stock has recently bounced from a low of $5.24 a share to $6.32 a share. The current reading on the relative strength index is showing an oversold condition at 33. Oversold can always get more oversold, but if the price trend starts to change here for Photronics, then we could see a bounce.

I would only be a buyer of this stock after its report if you see it trade above $6.32 a share on heavy volume. Look for volume that's greater than or close to its three-month average volume of 929,000 shares. I would look for a run towards its 50-day ($7.76) and 200-day ($7.66) moving averages if the stock clears $6.32 with volume. I would only short this stock after its report if shares slip below $5.24 on heavy volume. I would target $4.50 to $4 a share if the stock fails to hold above $5.24 after they report earnings.

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