Lennar

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Another potential earnings short-squeeze play is homebuilder Lennar ( LEN), which is set to release its numbers on Tuesday before the market open. Wall Street analysts, on average, expect Lennar to report revenue of $1.32 billion on earnings of 44 cents per share.

Another heavily-shorted stock that's been on fire heading into its earnings report is Lennar. This stock has ripped higher by 32% during the last six months and shares are trading just one point off its 52-week high of $42 a share.

The current short interest as a percentage of the float for Lennar is extremely high at 22.7%. That means that out of the 163.92 million shares in the tradable float, 34.92 million shares are sold short by the bears. If this company can deliver the earnings news the bulls are looking for, then shares could easily short-squeeze big post-earnings.

From a technical perspective, LEN is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strongly for the last six months, with shares moving higher from a low of $28.48 to its recent high of $42 a share. During that uptrend, shares of LEN have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed LEN within range of triggering a near-term breakout trade post-earnings.

If you're in the bull camp on LEN, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 52-week high of $42 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 4,732,400 shares. If that breakout hits, then LEN will set up re-test to enter new 52-week-high territory, which is bullish price action. Some possible upside targets are $50 to $55 a share.

I would simply avoid LEN or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below some key near-term support at $40 a share with high volume. If we get that move, then LEN will set up to re-test or possibly take out its 50-day moving average of $38.30 a share.

If you liked this article you might like

Ironwood Shares Jump on FDA Approval for Hyperuricemia Drug - Biotech Movers

5 Ways Allergan Can Keep Up Momentum

Premarket Biotech Movers: Ironwood Pharmaceuticals, Rigel Pharmaceuticals, FibroGen

Synergy Pharmaceuticals Secures Approval for Linzess Competitor

Ironwood Pharmaceuticals (IRWD): Today's Weak On High Volume Stock