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Arctic Cat

My final earnings short-squeeze idea is semiconductor player Arctic Cat ( ACAT), which is set to release numbers on Tuesday before the market open. This company designs, engineers, manufactures and markets snowmobiles and all-terrain vehicles under the Arctic Cat brand name, as well as related parts, garments and accessories. Wall Street analysts, on average, expect Arctic Cat to report revenue of $92.71 million on a loss of 56 cents per share.

Recently, KeyBanc said Arctic Cat dealer checks were encouraging, regarding the recent sell-through of the Wildcat, and the ATV category appears to have reached an inflection point. The firm said valuation on the stock is compelling and it reiterated its buy rating and $60 price target.

The current short interest as a percentage of the float for Arctic Cat stands at 8.6%. That means that out of the 12.23 million shares in the tradable float, 1.06 million are sold short by the bears. This stock has a decent short-interest and an extremely low float. The bears have also been increasing their bets from the last reporting period by 26.3%, or by about 220,000 shares. If the bears are caught leaning too hard into this quarter, then this stock could experience a monster short-squeeze.

From a technical perspective, ACAT is currently trading right below its 50-day moving average and above its 200-day moving average, which is neutral trendwise. This stock has been in a monster uptrend for the past six months with shares rising a whopping 80%. During that move, shares of ACAT have soared from $18.50 to a recent high of $47.46 a share. After tagging that high, this stock has sold off back below its 50-day moving average of $42.51 a share.

If you're bullish on ACAT, I would wait until after they report and look for long-biased trades if this stock manages to move back above its 50-day moving average of $42.51 a share with high-volume. Look for volume on that move that's near or well above its three-month average action of 232,416 shares. If we get that move, then I would add to any ACAT long positions if the stock triggers an even bigger breakout above $45 to $47.60 a share with high-volume.

I would simply avoid ACAT or look for short-biased trades if it fails to recapture its 50-day moving average, and then drops below some major near-term support levels at $40.64 to $39 a share with high-volume. If we get that action, then I would target a drop back toward $35 to $30 a share if the bears whack this stock down post-earnings.

To see more potential earnings short squeeze plays, check out the Earnings Short Squeeze Plays portfolio on Stockpickr.

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At the time of publication, the author had no positions in any of the 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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