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My final earnings short-squeeze trade idea is Wendy's ( WEN), which is set to release numbers on Wednesday before the market open. This company operates quick service restaurants specializing in hamburger sandwiches throughout the U.S. Wall Street analysts, on average, expect Wendy's to report revenue of $637.94 million on earnings of 4 cents per share.

The current short interest as a percentage of the float for Wendy's sits at 3.6%. That means that out of the 266.11 million shares in the tradable float, 13.21 million shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a solid short squeeze if Wendy's can deliver the earnings news the bulls are looking for.

From a technical perspective, WEN is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending modestly for the last three months, with shares moving higher from its low of $4.09 to its recent high of $4.87 a share. During that uptrend, shares of WEN have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed WEN within range of triggering a breakout trade post-earnings.

If you're in the bull camp on WEN, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some key overhead resistance levels at $4.87 to $4.95 a share and then above $5.13 to $5.33 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 2.9 million shares. If that breakout hits, then WEN will set up to re-test or possibly take out its next major overhead resistance levels at $5.50 to $5.58 a share. Any move above those levels will then put $5.62 into focus for shares of WEN.

I would simply avoid WEN if after its report it fails to trigger that breakout, and then drops back below both its 50-day at $4.63 and its 200-day at $4.57 a share with high volume. If we get that move, then WEN will set up to re-test or possibly take out its next major support levels at $4.28 to $4.10 a share post-earnings.

To see more potential earnings short squeeze plays, check out the Earnings Short Squeeze Plays portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.


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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

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