Liz Claiborne

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My first earnings short-squeeze trade idea is apparel and accessories maker Liz Claiborne ( LIZ), which is set to report its numbers on Wednesday before the market open. This company designs and markets a portfolio of retail-based brands, including Juicy Couture, Kate Spade, Lucky Band and Mexx. Wall Street analysts, on average, expect Liz Claiborne to report revenue of $477.50 million on earnings of 10 cents per share.

If you're looking for a stock that's trading within range of a triggering a big breakout post-earnings, then make sure to take a strong look at shares of Liz Claiborne. This stock is trending very strong and tagging new 52-week highs as we near its earnings report this week.

The current short interest as a percentage of the float for Liz Claiborne is extremely high at 25.6%. That means that out of the 81.71 million shares in the tradable float, 23.92 million shares are sold short by the bears. This is a very high short interest, so if the bulls get the news they're looking for this stock could explode to the upside.

From a technical perspective, LIZ is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong since it hit a recent bottom in October at $4.14 a share. Since hitting that bottom, LIZ has consistently made higher lows and higher highs, which his bullish price action. Now the stock is within range of breaking out post-earnings.

If you're bullish on LIZ, I would look for long-biased trades following earnings if the stock takes out $10.50 (or its daily high Tuesday if it's greater than $10.50) with strong volume. Look for volume that's tracking in close to or above its three-month average of 2,513,880 shares. If we get that action, then look for LIZ to spike 10% to 15% following earnings.

I would avoid LIZ or look for short-biased trades if after its earnings report the stock fails to breakout and then drops below some near-term support at $9.61 to $9.22 (its 50-day) with volume. If we get that action, I would target a drop back towards $8 to $7.50 a share if the bears hammer this lower post-earnings.

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