Acadia Healthcare

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My final earnings short-squeeze trade idea is inpatient behavioral health care services provider Acadia Healthcare ( ACHC), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Acadia Healthcare to report revenue of $110.72 million on earnings of 19 cents per share.

Just recently, RW Baird called Acadia Healthcare one of its top picks following its acquisition of another hospital. The firm cited its above-average EBITDA growth, meaningful capital, deployment opportunities and benign regulatory risks. The firm has an outperform rating on the stock and a $32 a share price target.

The current short interest as a percentage of the float for Acadia Healthcare sits at 7.2%. That means that out of the 28.98 million shares in the tradable float, 2.48 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 8%, or by about 182,000 shares. If the sellers are caught pressing too aggressively into a strong quarter, then shares of ACHC could squeeze significantly higher post-earnings.

From a technical perspective, ACHC is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been trending sideways in a consolidation pattern for the last month, with shares moving between $24.18 on the downside and $27.51 on the upside. A high-volume move above the upper-end of that sideways chart pattern will trigger a breakout trade for ACHC post-earnings.

If you're in the bull camp on ACHC, 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 $27.10 to $27.51 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 364,559 shares. If that breakout triggers, then ACHC will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $30 to $35 a share.

I would simply avoid ACHC 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 $25.20 to its 50-day at $24.56 a share with high volume. If we get that move, then ACHC will set up to re-test or possibly take out its next major support levels at $24.18 to $23.39 a share. Any high-volume move below $23.39 will then put $22 to $21.26 into range for shares of ACHC.

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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