Green Mountain Coffee Roasters

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One potential earnings short-squeeze candidate is specialty coffee and coffee maker player Green Mountain Coffee Roasters ( GMCR), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Green Mountain Coffee Roasters to report revenue of $1.33 billion on earnings of 65 cents per share.

Last week, Longbow said that after conducting checks, the demand growth for Keurig brewers and K-Cups either held firm or accelerated through the end of the latest peak holiday season at most of the retailers contacted by the firm. The firm added that private label single-serve coffee offerings failed to gain traction at the retailers with whom it spoke, and it now has increased confidence in its above-consensus estimates for Green Mountain Coffee Roasters. The firm maintained its buy rating on the stock.

The current short interest as a percentage of the float for Green Mountain Coffee Roasters is extremely high at 25.6%. That means that out of the 128.70 million shares in the tradable float, 31.01 million shares are sold short by the bears. Any bullish earnings news could easily set off a monster short-squeeze for GMCR post-earnings.

From a technical perspective, GMCR is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last two months, with shares soaring high from around $34 to its recent high of $47.62 a share. During that uptrend, shares of GMCR have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of GMCR within range of triggering a near-term breakout trade post-earnings.

If you're bullish on GMCR, 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 at $47.62 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 5.3 million shares. If that breakout triggers, then GMCR will set up to re-fill some of its previous gap down zone from last May that started at $50.05 a share. Any high-volume move above $50.05 will then put $60 into range for shares of GMCR.

I would avoid GMCR 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 levels at $43.04 to $40.04 a share with high volume. If we get that move, then GMCR will set up to re-test or possibly take out its next major support levels at $38.83 to $37.20 a share.

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