Questcor Pharmaceuticals

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An earnings short-squeeze candidate in the biotechnology and drugs complex is Questcor Pharmaceuticals ( QCOR), which is set to report results on Tuesday after the market close. This is an equipment rental company. Wall Street analysts, on average, expect Questcor Pharmaceuticals to report revenue of $89.22 million on earnings of 52 cents per share.

If you're looking for a heavily-shorted stock that's trading within range of a major breakout post-earnings, then make sure to check out shares of Questcor Pharmaceuticals. Heading into its earnings report this week, shares of Questcor Pharmaceuticals are trading just a few points off its 52-week high of $45.95 a share.

The current short interest as a percentage of the float for Questcor Pharmaceuticals is extremely high at 24.5%. That means that out of the 59.75 million shares in the tradable float, 15.41 million are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 2.6%, or by about 513,900 shares. If the bears are caught leaning too hard into this quarter, then a massive short-squeeze could easily develop post-earnings.

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From a technical perspective, QCOR is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the past three months, with shares surging from a low of $32.92 to a recent high of $42.44 a share. During that uptrend, shares of QCOR have mostly made higher lows and higher highs, which is bullish technical price action. That move has now pushed QCOR within range of triggering a major breakout trade post-earnings.

If you're bullish on QCOR, I would wait until after it reports earnings and look for long-biased trades if this stock can manage to break out above $42.44 on high-volume. Look for volume on that move that registers near or well above its three-month average action of 2,050,770 shares. If we get that action, I would then add to any long positions if QCOR can manage to take out its 52-week high of $45.95 with high volume. Target a run towards $50 a share or possibly higher post-earnings if the bulls spark a massive short-squeeze.

I would simply avoid QCOR or look for short-biased trades if after earnings this stock fails to trigger that breakout, and then moves back below some near-term support at $39 a share with high-volume. If we get that move, then target a drop below its 50-day moving average of $38.07 a share, and possibly down towards its 200-day moving average of $35.49 a share.

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