Questcor Pharmaceuticals

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My first earnings short-squeeze play is biopharmaceutical player Questcor Pharmaceuticals ( QCOR), which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Questcor Pharmaceuticals to report revenue of $142.58 million on earnings of $1 per share.

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Just last week, Mizuho upgraded Questcor ahead of its earnings report this week following checks that indicate improved fundamentals and reduced reimbursement concerns. The firm raised its price target to $41 per share.

The current short interest as a percentage of the float for Questcor Pharmaceuticals is extremely high at 45%. That means that out of the 49.77 million shares in the tradable float, 25.93 million shares are sold short by the bears. This is a big short interest on a stock with a relatively low tradable float. Any bullish earnings news could easily spark a monster short-squeeze for shares of QCOR post-earnings.

From a technical perspective, QCOR is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock recently bounced strong right off its 50-day moving average of $27.30 a share and that move is quickly pushing it within range of triggering a near-term breakout trade post-earnings.

If you're bullish on QCOR, 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 $31.50 a share and then once it takes out its 200-day moving average of $33.93 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 1.6 million shares. If that breakout triggers, then QCOR could easily trend well north of $40 a share post-earnings.

I would simply avoid QCOR or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some near-term support at its 50-day moving average of $27.30 a share with high volume. If we get that move, then QCOR will set up to re-test or possibly take out its next major support levels at $24.75 to $24.38 a share. Any high-volume move below those levels will then put $21.37 into range for shares of QCOR.

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