Fred's

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An earnings short-squeeze candidate in the department and discount store complex is Fred's ( FRED), which is set to release numbers on Thursday before the market open. This company is engaged in the sale of general merchandise through its retail discount stores and full-service pharmacies. Wall Street analysts, on average, expect Fred's to report revenue of $500.86 million on earnings of 27 cents per share.

If you're looking for a heavily shorted stock that's trading within range of triggering a major breakout trade post-earnings, then make sure to check out shares of Fred's ahead of its earnings report this week. During the last six months, shares of Fred's have trended up 17.6% and the stock is just one point off its 52-week high of $15.27 a share.

The current short interest as a percentage of the float for Fred's is very high at 16.6%. That means that out of the 34.17 million shares in the tradable float, 5.68 million are sold short by the bears. This stock could rip sharply higher post-earnings due to its low float and high short interest. All the bulls will need is for Fred's to report solid earnings and bullish forward guidance.

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From a technical perspective, FRED is currently trading above both its 50-day and 200-day moving averages, which is bullish. During the last four months, this stock has been trending sideways between $13.12 on the downside and $15.20 on the upside. A high-volume move outside of that range post-earnings should set this stock up for its next major trend.

If you're in the bull camp on FRED, I would look for long-biased trades after they report if this stock manages to trigger a break out above some near-term overhead resistance at $15.20 a share with high-volume. Look for volume on that move that registers near or close to its three-month average action of 248,521 shares. If we get that move, then look for FRED to spike 15% or more post-earnings.

I would simply avoid FRED or look for short-biased trades if the stock fails to trigger that breakout, and then drops back below some near-term support at $14 to $13.75 a share with high-volume. Target a drop towards its 200-day moving average of $13.10 a share or possibly down to $12 a share if the bears spark a big-time selloff post-earnings.

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