Francesca's

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My first earnings short-squeeze trade candidate is retail player Francesca's ( FRAN), which is set to report its numbers on Tuesday after the market close. This company operates a national chain of retail boutiques designed and merchandised. Wall Street analysts, on average, expect Francesca's to report revenue of $57.16 million on earnings of 16 cents per share.

If you're looking for a heavily shorted stock that recently triggered a near-term breakout that's trending strong heading into its report, then check out shares of Francesca's. This stock broke out on Monday above some near-term overhead resistance at $24.63 a share, and its trading just a few points off its 52-week high of $29.75.

The current short interest as a percentage of the float for Francesca's is pretty high at 12.6%. That means that out of the 25.7 million shares in the tradable float, 3.23 million shares are sold short by the bears. This is a low float high-short interest situation, so if the bulls get the news they're looking for this stock could easily short-squeeze big.

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From a technical perspective, FRAN is currently trading above both its 50-day moving average, which is bullish. This stock has been uptrending strong since it found buying interest back in December at around $15.22 to $15.96 a share. During that uptrend, the stock has been mostly making higher lows and higher highs, which is bullish price action. Now the stock is breaking out above some near-term overhead resistance, and it's within range of another big breakout.

If you're bullish on FRAN, I would look for long-biased trades following its earnings if the stock takes out $27.06 a share with strong volume. Look for volume that's tracking in close to or above its three-month average of 384,392 shares. If we get that action, then look for FRAN to make a run at its all-time-high of $29.75 a share, and then potentially take that level out and trend higher.

I would avoid FRAN 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 $24 to $23 a share with volume. If we get that action, I would target a drop back towards its 50-day moving average of $22.26 or possibly lower if the bears slam this stock post-earnings.

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