I would simply avoid DSW or look for short-biased trades if after earnings this stock fails to trigger that breakout, and then drops back below some near-term support levels at $58.28 to $57.27 a share with high volume. If we get that move, then look or DSW to re-test or possibly take out its next major support levels at $54.07 to $53.97 a share.


One potential earnings short-squeeze trade is Zale ( ZLC), which is set to release numbers on Tuesday after the market close. This company is a specialty retailer of fine jewelry in North America. Wall Street analysts, on average, expect Zale to report revenue of $364.65 million on a loss of 67 cents per share.

During the last quarter, this company beat estimates by 23 cents, coming in at a net loss of 61 cents per share versus Wall Street estimates of a loss of 84 cents per share. That registered the fourth straight quarter in a row that Zale has topped Wall Street estimates.

The current short interest as a percentage of the float for Zale sits at 6.7%. That means that out of the 27.13 million shares in the tradable float, 2.12 million shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a decent short-covering rally if Zale can deliver the earnings news the bulls are looking for.

From a technical perspective, ZLC is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strongly for the past five months, with shares soaring from a low of $2.52 to its recent high of $7.66 a share. During that uptrend, shares of ZLC have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed the stock within range of triggering a near-term breakout trade post-earnings.

If you're bullish on ZLC, then I would wait until after its report and look for long-biased trades if it can manage to break out above some near-term overhead resistance at $7.66 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 779,286 shares. If ZLC triggers that breakout, then this stock will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets are $9 to $10 a share.

If you liked this article you might like

Here's What Carl Icahn Bought and Sold in the First Quarter

Wall Street Dissects What Trump's Comey Firing Means for Agenda, Disney Drags on Dow

Stocks Fall as Trump's Comey Firing Distracts From Progress in Tax Cut Plan

Stock Futures Fall After Trump Axes FBI Director Comey

Week Ahead: Department Stores Set to Report Earnings Amid Retail's 'Creeping Armageddon'