Pier 1 Imports

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Another earnings short-squeeze play in is specialty retailer of decorative home furnishings and gifts Pier 1 Imports ( PIR), which is set to release its numbers on Thursday before the market open. Wall Street analysts, on average, expect Pier 1 Imports to report revenue of $367.17 million on earnings of 19 cents per share.

This stock has been trending bullishly so far in 2012, with shares up over 35%. As we get close to its earnings report, shares of PIR are trading very close to its 52-week high of $19.62 a share.

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The current short interest as a percentage of the float for Pier 1 Imports is pretty high at 9%. That means that out of the 93.45 million shares in the tradable float, 8.27 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 5.3%, or by about 417,000 shares. If the bears are caught leaning too hard into this quarter, then we could easily see a large short-squeeze develop post-earnings.

From a technical perspective, PIR is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last two months, with shares soaring from a low of $15.12 to its recent high of $19.62 a share. During that uptrend, shares of PIR have consistently made higher lows and higher highs, which is bullish technical price action. That move has now pushed PIR within range of triggering a major breakout trade post-earnings.

If you're in the bull camp on PIR, then I would wait until after its report and look for long-biased trades if this stock manages to trigger a break out to a new 52-week high above $19.62 a share with heavy volume. Look for volume on that move that registers near or above its three-month average action of 1.6 million shares. If we get that breakout, then look for PIR to head well north of $20 a share post-earnings.

I would simply avoid PIR or look for short-biased trades if after earnings this stock fails to trigger that breakout and then moves below some near-term support levels at $18.50 to $18 a share with heavy volume. If we get that move, then PIR will setup to re-test or possibly take out its 50-day moving average of $17.24 a share.

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