Mako Surgical

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My first earnings short-squeeze idea today is medical equipment and supplies player Mako Surgical ( MAKO), which is set to release its numbers on Monday after the market close. This is a medical device company that markets its robotic arm solution and orthopedic implants for orthopedic procedures called MAKOplasty. Wall Street analysts, on average, expect Mako Surgical to report revenue of $23.75 million on a loss of 20 cents share.

If you're looking for a heavily-shorted stock that's trending very strong heading into its quarter, then take a look at shares of Mako Surgical. This stock has racked up gains of 55% so far in 2012, and shares are trading just six points off its 52-week high of $45.15 a share.

The current short interest as a percentage of the float for Mako Surgical is extremely high at 35.9%. That means that out of the 37.77 million shares in the tradable float, 11.94 million shares are sold short by the bears. This is a huge short interest on a stock with a very low float. If Mako Surgical beats earnings and raises its forward guidance, then this stock could easily spike big-time post-earnings as the shorts rush to cover some of their bets.

From a technical perspective, Mako is currently trading below its 50-day moving average and above its 200-day moving average, which is neutral trendwise. This stock had been uptrending strong for the past six months, with shares ripping higher from a low of $24.40 to a recent high of $45.15 a share. That said, since hitting $45.15 the stock has run into heavy resistance at around $43 to $42 a share, and it has now dropped back below its 50-day moving average of $40.59 a share.

If you're bullish on MAKO, I would wait until after its report and look for long-biased trades if this stock can manage to trigger a break out back above its 50-day and then above $45.15 a share with high volume. Look for volume on that move that registers close to or well above its three-month average action of 921365 shares. If we get that action, then look for MAKO to tag $50 to $55 a share post-earnings.

I would simply avoid MAKO or look for short-biased trades if after earnings this stock fails to move back above its 50-day, and then drops back below its 200-day moving average of $34.96 a share with heavy volume. Target a drop down to $32 to $28 a share if the bears whack this stock lower post-earnings.

Mako Surgical shows up on a list of 10 Small-Cap Stocks Poised to Rise, History Shows.

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