Qihoo 360 Technology

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My final earnings short-squeeze idea for today is computer services player Qihoo 360 Technology ( QIHU), which is set to release numbers on Tuesday after the market close. This company is engaged in the operations of Internet services and sales of third party anti-virus software in the People's Republic of China. Wall Street analysts, on average, expect Qihoo 360 Technology to report revenue of $60.47 million on earnings of 17 cents per share.

The current short interest as a percentage of the float for Qihoo 360 Technology is extremely high at 22.1%. That means that out of the 44.19 million shares in the tradable float, 13.05 million are sold short by the bears. This is a very high short interest on a stock with a relatively low tradable float. If Qihoo 360 Technology can report a solid quarter and raise its forward guidance, then this stock could skyrocket post-earnings.

From a technical perspective, QIHU 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 uptrending strong for the past five months, with shares moving sharply higher from a low of $13.71 to a high of $26.35 a share. After hitting that high, shares of QIHU have struggled to get above $26.30 to $25 a share, with sellers coming in to drive the stock lower whenever it trades near those levels. Shares of QIHU recently moved back below its 50-day moving average of $22.19 with high volume.

If you're in the bull camp on QIHU, I would wait until after its report and look for long-biased trades if this stock manages to trade above some near-term overhead resistance at $21.72, and its 50-day moving average of $22.91 a share with high-volume. Look for volume on that move that's near or well above its three-month average action of 2,093,890 shares. If we get that move, then QIHU has a good chance to re-test that significant overhead resistance at $25 to $26.30 a share if the bulls gain full control of this stock post-earnings.

I would simply avoid QIHU or look for short-biased trades if it fails to trigger that move over $21.72 to $22.91 a share, and then drops below some major near-term support levels at its 200-day moving average of $19.71 to $18.80 a share with high-volume. If we get that action, then I would target a drop back towards $16 to $15 a share or possibly lower if the bears hammer this stock down 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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