8x8

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One earnings short-squeeze play in the communications complex is 8x8 ( EGHT), which is set to release numbers on Wednesday after the market close. This company develops and markets telecommunications services for Internet protocol, telephony and video applications, as well as Web-based conferencing and unified communications services, managed hosting and cloud-based computing services. Wall Street analysts, on average, expect 8x8 to report revenue of $24.86 million on earnings of 4 cents per share.

During the last quarter, this company reported revenue of $24.22 million, and GAAP sales were 333% higher than the previous quarter's $18.2 million. The current short interest as a percentage of the float for 8x8 is pretty high at 12.6%. That means that out of the 60.76 million shares in the tradable float, 8.49 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 5.4%, or by about 432,000 shares.

From a technical perspective, EGHT is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong off its May low of $3.80 a share, with shares jumping to its recent high of $4.52 a share. During that uptrend, shares of EGHT have been making higher lows and higher highs, which is bullish technical price action. That move has now pushed EGHT within range of triggering a near-term breakout trade post-earnings.

If you're bullish on EGHT, 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 some overhead resistance at $4.52 to $4.73 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 419,287 shares. If we get that action, then EGHT could well be on its way of trading north of $5 a share. In fact, this stock could potentially hit or take out its 2011 high of $5.44 a share if the bulls gain full control of this stock post-earnings.

I would avoid EGHT if it fails to trigger that breakout after earnings and then look for this stock to re-test its 50-day moving average of $4.13 a share.

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