Hot Topic

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If you're looking for an earnings short-squeeze play in the retail sector, then consider Hot Topic ( HOTT), which is set to release numbers on Wednesday after the market close. This company, together with its subsidiaries, operates as a mall- and Web-based specialty retailer in the U.S. The company operates Hot Topic and Torrid store concepts, as well as an e-space music discovery concept, ShockHound. Wall Street analysts, on average, expect Hot Topic to report revenue of $147.63 million on a loss of 8 cents per share.

Hot Topic has met Wall Street expectations for the past four quarters. During the last quarter, the firm reported zero cents per share, which met the median Wall Street forecast. Revenue during those past four quarters have been trending down, by 0.8% to 4.9%.

The current short interest as a percentage of the float for Hot Topic is a reasonably large 9.7%. That means that out of the 40.74 million shares in the tradable float, 4.27 million are sold short by the bears.

From a technical standpoint, the stock is currently trading below its 50-day moving average and above its 200-day moving average, which is neutral trendwise. Shares of Hot Topic just found some buying support right around its 200-day moving average ($6.34) and it has run into resistance near its 50-day ($7.35).

The way I would pay this stock would be to buy it after its report if it trades above its 50-day moving average on big volume. Look for volume that's close to or greater than 656,000 shares. I would add to any long position once this stock breaks out above $8.37 to $8.42 share.

I would only short this name if it drops below its 200-day moving average after its report on big volume. I would target $5 a share of the bears take over control of this stock.

Hot Topic is one of the highest-yielding retail stocks.

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