Bed Bath & Beyond

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My first earnings short-squeeze play is specialty retailer Bed Bath & Beyond ( BBBY), which is set to report results on Wednesday after the market close. This company sells a range of domestics merchandise and home furnishings. Wall Street analysts, on average, expect Bed Bath & Beyond to report revenue of $2.25 billion on earnings of 84 cents per share.

Wall Street is looking for Bed Bath & Beyond to report first-quarter earnings growth of 17% and a rise of 6.4% in sales this week. This company has posted double-digit EPS gains for 12 quarters in a row, on high single-digit or low double-digit revenue growth. Bed Bath & Beyond has also beaten Wall Street profit estimates in seven of the last eight quarters.

The current short interest as a percentage of the float for Bed Bath & Beyond sits at 2.5%. That means that out of the 223.77 million shares in the tradable float, 5.65 million shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a solid short-covering rally if BBBY delivers the numbers the bulls are looking for.

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From a technical perspective, BBBY is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the past five months, with shares soaring from a low of $57.58 to a high of $74.67 a share. During that run, shares of BBBY have consistently made higher lows and higher highs, which is bullish technical price action. That move has now pushed BBBY within range of triggering a major breakout trade.

If you're bullish on BBBY, then I would wait until after they report earnings and look for long-biased trades if this stock can manage to trigger a break out to a new 52-week high above $74.67 a share with high-volume. Look for volume on that move that hits near or above its three-month average action of 2.6 million shares. If we get that move, then look for BBBY will be trading in all-time high territory. Target a move towards $80 to $85 a share if the bulls gain full control of this stock post-earnings.

I would simply avoid BBBY or look for short-biased trades if after earnings it fails to trigger that breakout to new 52-week highs, and then drops below some near-term support at $72 a share with high volume. If we get that move, then BBBY could easily re-test and possibly take out its 50-day moving average of $70.43 a share post-earnings.

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