DragonWave

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One more earnings short-squeeze play is DragonWave ( DRWI), which is set to release its numbers on Wednesday after the market close. This company developments broadband wireless backhaul and pseudowire equipment. Wall Street analysts, on average, expect DragonWave to report revenue of $13.59 million on a loss of 19 cents per share.

If you're looking for a stock that's been beaten down of late, then take a hard look at DragonWave ahead of their quarterly report. This stock has dropped from its November high of $5.50 a share to a recent low of $3.11.

The current short interest as a percentage of the float DragonWave is rather high at 8.2%. That means that out of the 33.66 million shares in the tradable float, 2.82 million are sold short by the bears.

From a technical standpoint, DRWI is currently trading below both its 50-day and 200-day moving averages, which is bearish. Since hitting that November highs of $5.50, this stock has been trending lower making lowers highs and lower lows, which is bearish price action. That said, the stock is trading very close to some near-term support zones at $3.25 to $3.11 a share.

If you're bullish DRWI, I would wait until after its report and buy the stock once it breaks out above $3.55 with high volume. Look for volume that registers close to or above its three-month average action of 332,586 shares. I would target a run back toward its 50-day moving average of $4.12 if we get that breakout over $3.55 with volume. I would avoid this stock altogether after they report if it fails to ever take out $3.55 with volume.

To see more potential earnings short squeeze candidates, check out the Earnings Short Squeeze Plays portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.

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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.

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