Cree

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My first earnings short-squeeze play today is Cree ( CREE), a provider of LED products, lighting products and semiconductor products for power and radio-frequency applications, which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Cree to report revenue of $317.89 million on earnings of 26 cents per share.

Cree is looking to beat Wall Street estimates for the third straight quarter. During the last quarter, Cree reported a profit of 16 cents per share versus estimates of 13 cents per share, and in the previous quarter, the company beat forecasts by 2 cents with a profit of 15 cents per versus estimates of 13 cents per share.

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The current short interest as a percentage of the float for Cree is rather high at 15.5%. That means that out of the 113.34 million shares in the tradable float, 17.62 million shares are sold short by the bears.

From a technical perspective, CREE is currently trading below both its 50-day and 200-day moving averages, which is bearish. During the last month, shares of CREE have been trending sideways between $24.50 and $26 a share. A high-volume move outside of that range post-earnings will likely setup the next major trend for CREE.

If you're bullish on CREE, then I would wait until after its report and look for long-biased trades once it manages to break out above some near-term overhead resistance levels at $26 to $27.27 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 1,435,600 shares. If that breakout triggers, then look for CREE to re-test or possibly take out its next major overhead resistance at $29.47 a share post-earnings.

I would simply avoid CREE or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops below some near-term levels at $24.50 to $24 a share with heavy volume. If we get that move, then CREE will setup to re-test or possibly take out its next major support levels at $22.25 to $20.25 a share.

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