Buffalo Wild Wings

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My first earnings short-squeeze trade idea is Buffalo Wild Wings ( BWLD), an owner, operator and franchiser of restaurants. which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Buffalo Wild Wings to report revenue of $254.03 million on earnings of 60 cents per share.

This company missed Wall Street estimates last quarter after beating estimates in the prior two quarters. During the second quarter, this company reported a profit of 62 cents per share versus estimates of 68 cents per share. In the first quarter, the company beat Wall Street estimates by 3 cents per share. Buffalo Wild Wings has averaged year-over-year revenue growth of 33.2% over the last four quarters.

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The current short interest as a percentage of the float for Buffalo Wild Wings is very high at 14.1%. That means that out of the 18.34 million shares in the tradable float, 2.59 million shares are sold short by the bears. This is a high short interest on a stock with a very low float. Any bullish earnings news could easily spark a sizeable short-squeeze post-earnings.

From a technical perspective, BWLD is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending very strong for the last three months, with shares soaring from a low of $68.71 to a recent high of $89.90 a share. During that uptrend, shares of BWLD have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed BWLD within range of triggering a near-term breakout trade post-earnings.

If you're bullish on BWLD, then I would wait until after its report and look for long-biased trades as long as it's trending above its 200-day at $81.74 a share, and then once it breaks out above some near-term overhead resistance at $88 to $89.90 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 588,131 shares. If that breakout triggers, then look BWLD to re-test or possibly take out its next major overhead resistance level at $94.81 a share.

I would simply avoid BWLD or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops below its 200-day moving average of $81.74 a share with heavy volume. If we get that move, then BWLD will setup to re-test or possibly take out its next major support levels at $76 to $72 a share.

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