iRobot

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My final earnings short-squeeze trade idea today is iRobot ( IRBT), which is set to release numbers on Tuesday after the market close. This company engages in designing, developing, and marketing robots for the consumer, government, and industrial markets worldwide. Wall Street analysts, on average, expect iRobot to report revenue of $96.25 million on a loss of 2 cents per share.

If you're looking for a beaten-down heavily-shorted stock heading into its earnings report, then make sure to check out shares of iRobot. This stock has dropped over 17% so far in 2012, and it's trending just a few points above its 52-week low of $22.46 a share.

The current short interest as a percentage of the float for iRobot is rather high at 13.6%. That means that out of the 25.77 million shares in the tradable float, 3.37 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 33.1%, or by about 838,000 shares. The bears might be pressing their bets at the worst time, since this stock is so beaten-down that any positive earnings news could spark a big short-squeeze.

From a technical perspective, IRBT is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock gapped down huge back in February from $38.33 to around $25 a share on massive volume. Following that gap down, the stock has been able to find buying interest whenever it's moved close to $24 a share. The current relative strength (RSI) reading for IRBT is oversold at 35.58. Oversold can always get more oversold, but if IRBT can hold support at $24 then it could spike big post-earnings.

If you're bullish on IRBT, I would wait until after they report earnings and look for long-biased trades if this stock can hold above its recent low of $24.03 to $22.46 a share. If those levels can hold, I would then look for the stock to break out above some near-term overhead resistance at $25.84 to $25.99 (50-day) a share with high-volume. Look for volume on a move above those levels that hits near or well above its three-month average action of 595,298 shares. If we get that action, look for IRBT to make a run at its 200-day moving average of $29.22 a share or possibly higher post-earnings.

I would simply avoid IRBT or look for short-biased trades post-earnings if this stock takes out those previous support levels at $24.03 to $22.46 a share with high volume. If those levels are taken out with volume, then IRBT could easily plunge below $20 a share if the bears whack this stock 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.

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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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