Shuffle Master

My first earnings short-squeeze trade idea today is casinos and gaming player Shuffle Master ( SHFL), which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect Shuffle Master to report revenue of $67.93 million on earnings of 20 cents per share.

Just recently, Brean Murray said that investors concern regarding Shuffle Master's electronic table systems segment has created a buying opportunity before its third-quarter results. The firm thinks the concerns are overblown since the segment only makes up 10% of revenue and 6% of profits. Brean has a buy rating on the stock and a $19 price target.

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The current short interest as a percentage of the float for Shuffle Master is notable at 4.1%. That means that out of the 54.51 million shares in the tradable float, 2.25 million shares are sold short by the bears. If it can deliver the earnings news the bulls are looking for, then we could easily see a large short-squeeze develop post-earnings.

From a technical perspective, SHFL is currently trading above both its 50-day and 200-day moving averages, which is bullish. For the past two months, shares of SHFL have been trading in a sideways trading pattern between $13 on the downside and $15.84 on the upside. A move outside of that range post-earnings will likely setup the next major trend for SHFL.

If you're bullish on SHFL, then I would wait until after it reports earnings and look for long-biased trades if it can break out above some overhead resistance levels at $15.84 to $16.18 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 482,809 shares. If that breakout triggers, then look for SHFL to re-test or possibly take out its next major overhead resistance levels at $17.90 to $18.37 a share.

I would simply avoid SHFL or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops below some near-term support at $14.49 to $14.23 a share with high volume. If we get that move, then look for SHLF to re-test and possibly take out its next major support levels at $13.14 to $12.45 a share.

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