Lennar

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Another potential earnings short-squeeze play is homebuilding player Lennar ( LEN), which is set to release its numbers on Wednesday before the market open. This company, together with its subsidiaries, engages in homebuilding, financial services and real estate businesses in the U.S. Wall Street analysts, on average, expect Lennar to report revenue of $885.71 million on earnings of 17 cents per share.

During the last quarter, this company reported a profit of 8 cents per share vs. Wall Street estimates of 5 cents per share. This registered an earnings beat after the company had missed estimates in the prior quarter. In the fourth quarter of the last fiscal year, Lennar missed Wall Street estimates by one cent per share.

The current short interest as a percentage of the float for Lennar is extremely high at 23.4%. That means that out of the 162.41 million shares in the tradable float, 35.58 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 8.5%, or by about 350,000 shares. If the bears are caught leaning too hard into this quarter, then we could easily see a sizable short-squeeze develop for shares of Lennar post-earnings.

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From a technical perspective, LEN is currently trading above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock recently ran into heavy selling resistance at around $30 a share. After hitting that resistance, shares of LEN dropped back below its 50-day moving average of $26.89 and it hit a near-term low of $23.48 a share. The stock has rebounded off that low and is now trading within range of triggering a near-term breakout trade post-earnings.

If you're in the bull camp on LEN, then I would wait until after they report numbers and look for long-biased trades if this stock can manage to take out its 50-day at $26.89, and then break out above some near-term overhead resistance at $27.50 a share with high-volume. Look for volume on that move that registers near or above its three-month average action of 7,529,150 shares. If we get that action, then LEN has a great chance of re-testing and possibly taking out its 52-week high of $30.12 a share post-earnings.

I would simply avoid LEN or look for short-biased trades if after earnings this stock fails to trigger that breakout, and then trades back below some near-term support at $25.77 a share with high-volume. If we get that move, then look LEN to re-test and possibly take out some more near-term support at $23.48 a share.

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