Citi Trends

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A potential earnings short-squeeze trade is retailer of urban fashion apparel and accessories Citi Trends ( CTRN), which is set to report results on Tuesday before the market open. Wall Street analysts, on average, expect Citi Trends to report revenue of $143.49 million on a loss of 37 cents per share. This beaten-down stock was trading over $16 a share in July, and it is now changing hands at around $10.40.

The current short interest as a percentage of the float for Citi Trends is notable at 7.8%. That means that out of the 13.31 million shares in the tradable float, 1.13 million shares are sold short by the bears. This stock has an extremely small float and a decent short interest. Any bullish earnings news could easily set this off to the upside since the stock is so beaten-down.

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From a technical standpoint, this stock is currently trading well below its 200-day moving average and below its 50-day moving average, which is bearish. This stock recently sold off from $13.37 to its current price of just over $10.40 a share. The stock has some major previous support that sits right around $9.65 a share. The near-term resistance on CTRN is at $11 a share.

If you're bullish on this stock, I would wait until after it report its results and buy the stock once it clears $11 on high volume. Look for volume that's tracking in close to or above its three-month average action of 100,092 shares. I would then add to any long positions once the stock takes out its 200-day moving average of $11.79 with strong volume. Target a run back toward $12.50 or possibly higher if the bulls push this name up post-earnings.

I would avoid any long trades or would get short this stock after earnings if shares drop below that major support zone at $9.65 on heavy volume. I would target a drop back towards its next significant support level at $7 a share if the bears smack this lower post-earnings.

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