Cadence Design Systems

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

My final earnings short-squeeze trade for today is software and programming player Cadence Design Systems ( CDNS), which is set to release numbers on Wednesday before the market close. This company develops electronic design automation, software, hardware and silicon intellectual property. Wall Street analysts, on average, expect Cadence Design Systems to report revenue of $300.47 on earnings of 15 cents per share.

If you're looking for a lower priced earnings short-squeeze play that's trading close to some key breakout levels, then take a hard look at shares of Cadence Design Systems.

The current short interest as a percentage of the float for Cadence Design Systems stands at 8.2%. That means that out of the 270.01 million shares in the tradable float, 22.25 million shares are sold short by the bears.

From a technical standpoint, CDNS is currently trading right at it 50-day moving average and above its 200-day moving average, which is neutral trendwise. This stock has been trading within a sideways trading pattern for the past few months between $9.83 and $11.15 a share. A high-volume move outside of that pattern should setup CDNS for its next big trend.

If you're bullish on CDNS, I would wait until after it reports earnings and buy the stock if it breaks out above $10.85 and $11.15 a share with high-volume. Look for volume that's tracking in close to or above its three-month average volume of 2.8 million shares. If we get that action, I would then add to any long positions once CDNS takes out its 52-week high of $11.72 with volume.

I would get short or avoid shares of CDNS if after their report the stock fails to break out and then drops below its 50-day ($10.50) and 200-day ($10.11) moving averages with volume. If we get that action, I would then add to any shorts on a volume move below $9.83 to $9.68 a share. Target a drop back into the mid-to-high-8s if the bears hammer this lower post-earnings.

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

-- Written by Roberto Pedone in Winderemere, Fla.


Follow Stockpickr on Twitter and become a fan on Facebook.
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 and maintains the website, 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.

If you liked this article you might like

It's Buyer Beware on Ubiquiti Networks

This Company Could Be a Fraud, Noted Short-Seller Andrew Left Says

Stock Picking Is Getting Tough

Got an Email Marked 'Urgent' From the Boss? Think Twice Before Responding too Quickly

Chesapeake Energy, Priceline, Schlumberger, ZELTIQ : 'Mad Money' Lightning Round