Astoria Financial

A potential earnings short-squeeze trade in the banking complex is Astoria Financial ( AF), which is set to release numbers on Monday after the market close. Astoria provides various banking and financial products and services in the U.S. Wall Street analysts, on average, expect Astoria Financial to report revenue of $87.33 million on earnings of 14 cents per share.

This stock has been trending bullishly so far in 2012, with shares up over 20%. As we approach its earnings report, this stock is trading just a few cents off entering new 52-week-high territory.

>>5 Technical Trades Under $10

The current short interest as a percentage of the float for Astoria Financial is pretty high at 13.7%. That means that out of the 67.73 million shares in the tradable float, 11.53 million shares are sold short by the bears. This is a large short interest on a stock with a relatively low float. Any bullish earnings news could easily spark a solid short-covering rally post-earnings.

From a technical perspective, AF 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 two months, with shares consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed AF within range of breaking out and making new 52-week highs post-earnings.

If you're bullish on AF, then I would wait until after it reports earnings and look for long-biased trades if this stock can manage to print a new 52-week high above $10.59 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 540,062 shares. If we get that move, then look for AF to re-test or possibly take out its next major overhead resistance levels at $13 to $14 a share.

I would avoid AF or look for short-biased trades if after earnings it fails to trigger that breakout, and then moves back below some near-term support levels at $10.20 to $10 a share with heavy volume. If we get that action, then look for AF to re-test or possibly take out its 50-day moving average of $9.78 a share. If that 50-day gets taken out, then target a possible drop back towards its 200-day moving average of $9.08 a share post-earnings.

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