Under Armour

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Another earnings short-squeeze trade candidate is apparel player Under Armour ( UA), which is set to release numbers on Thursday before the market open. This company is engaged in the development, marketing and distribution of apparel, footwear and accessories for men, women and youth. Wall Street analysts, on average, expect Under Armour to report revenue of $576.36 million on earnings of 52 cents per share.

During the last quarter, Under Armour beat Wall Street estimates by once cent, coming in at a profit of 6 cents per share versus estimates of 5 cents per share. That marked the fourth straight quarter where the company topped Wall Street estimates. This company has averaged year-over-year revenue growth of 31.3% over the last four quarters.

The current short interest as a percentage of the float for Under Armour is extremely high at 17.1%. That means that out of the 78.59 million shares in the tradable float, 13.34 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 8.2%, or by about 232,000 shares. If the bears are caught pressing their bets into the quarter, then this stock could explode to the upside post-earnings.

From a technical perspective, UA is currently trading above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been uptrending modestly for the last month and change, with shares moving from a low of $53.28 to its recent high of $60.20 a share. During that uptrend, shares of UA have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed UA within range of triggering a near-term breakout trade post-earnings.

If you're bullish on UA, then I would wait until after its report and look for long-biased trades if this stock can manage to break out above some near-term overhead resistance levels at $60.20 to $60.96 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 1.5 million shares. If we get that move, then look for UA to enter new 52-week high territory above $60.96 a share. Some possible upside targets for UA on that move are $65 to $75 a share post-earnings.

I would avoid UA or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops below some key near-term support at $56 a share with heavy volume. If we get that action, then UA will setup to re-test or possibly take out its next major support levels at $54.20 to $53.28 a share. Any high-volume move below $53.28 a share could send UA back towards its 200-day at $49.57 a share post-earnings.

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