La-Z-Boy

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Another potential earnings short-squeeze trade is reclining chairs producer La-Z-Boy ( LZB), which is set to release numbers on Tuesday after the market close. This company manufactures, markets, imports, distributes and retails upholstery products, accessories and casegoods (wood) furniture products. Wall Street analysts, on average, expect La-Z-Boy to report revenue of $332.72 million on earnings of 26 cents per share.

The current short interest as a percentage of the float for La-Z-Boy is rather high at 9.4%. That means that out of the 46.86 million shares in the tradable float, 4.69 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 16.5%, or by about 664,000 shares. If the bears are caught learning too hard into this quarter, then we could easily see a large short-squeeze develop for shares of La-Z-Boy.

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From a technical perspective, LZB is currently trading above both its 200-day moving average and below its 50-day moving average, which neutral trendwise. This stock has been downtrending since the beginning of May, with shares sliding lower from $16.43 to a recent low of $12.58 a share. During that move lower, this stock has been making mostly lower highs and lower lows, which is bearish price action. That said, shares of LZB have found some buying interest at around $12.60 a share in the last few weeks.

If you're in the bull camp on LZB, then I would wait until after its report and look for long-biased trades if this stock can manage to trigger a break out above its 50-day moving average of $14.27 and then above some more overhead resistance at $14.93 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 558,672 shares. If we get that action, then look for LZB to re-test and possibly take out its May high of $16.43 a share if the bulls gain full control of this stock post-earnings.

I would avoid LZB or look for short-biased trades if after earnings this stock fails to trigger that breakout, and then drops below its 200-day moving average of $12.22 a share on high volume. If we get that move, then LZB could easily trade down back towards its next previous support zones at $11 to $9 a share if the bears hammer this stock lower post-earnings.

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