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Lifeway Foods

One earnings short-squeeze candidate is Lifeway Foods ( LWAY), which is set to release numbers on Tuesday after the market close. This company is engaged in the manufacturing of probiotic, cultured, functional dairy and non-dairy health food products. Wall Street analysts, on average, expect Lifeway Foods to report revenue of $20.84 million on earnings of 6 cents per share.

The current short interest as a percentage of the float for Lifeway Foods is very high at 14.9%. That means that out of the 4.63 million shares in the tradable float, 686,000 are sold short by the bears. This is a decent short-interest on a stock with an extremely low float. If LWAY can manage to report a solid quarter and raise forward guidance, then this stock could see a power short-squeeze since the float is so small.

From a technical perspective, LWAY is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been trending lower for the past six months, with shares dropping from $11.24 to a recent low of $8.03 a share.

During that downtrend, shares of LWAY have consistently made lower highs and lower lows, which is bearish price action. Traders will need to look for a change in that trend post-earnings in order for LWAY to spike higher.

If you're bullish on LWAY, I would look for long-biased trades after they report if this stock manages to move back above its 50-day moving average of $8.81 a share with high-volume. Look for volume on that move that registers near or well above its three-month average action of 10,403 shares. If we get that action, then the trend could change to bullish for LWAY, and the stock could spike back toward its 200-day moving average of $9.68 a share.

I would simply avoid LWAY or look for short-biased trades if the stock fails to trigger that move, and then drops back below some near-term support at $8.03 a share with high-volume. Target a 15% or more fall in shares of LWAY if that $8.03 support zone gets taken out with volume post-earnings.

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