Illumina

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My first earnings short-squeeze trade idea is life sciences tools and integrated systems developer Illumina ( ILMN), which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect Illumina to report revenue of $305.44 million on earnings of 41 cents per share.

If you're looking for a heavily-shorted stock that's uptrending decently heading into its quarterly earnings report, then make sure to check out shares of Illumina. This stock has been pretty hot during the last six months, with shares up 21%.

The current short interest as a percentage of the float for Illumina is very high at 23.4%. That means that out of the 123.38 million shares in the tradable float, 28.40 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then this stock could rip higher due to short-covering post-earnings.

From a technical perspective, ILMN is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has sold off during the last two months from its high of $57 to its recent low of $49.16 a share. Despite that selloff, shares of ILMN are still trending above its 200-day moving average and within range of triggering a near-term breakout trade post-earnings.

If you're bullish on ILMN, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at its 50-day moving average of $52.39 a share and then above more resistance at $54.10 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 1,601,830 shares. If that breakout hits, then ILMN will set up to re-test or possibly take out its next major overhead resistance level at $57 a share. Any move above $57 will then push shares of ILMN into new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $60 to $65 a share.

I would simply avoid ILMN or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below some near-term support levels at $50.20 to $49.16 a share with heavy volume. If we get that move, then ILMN will set up to re-test or possibly take out its next major support levels at $47.68 to its 200-day moving average of $46.28 a share.

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