If you're bullish on SHLD, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 200-day moving average at $49.06 a share and then once it takes out more overhead resistance at $49.18 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 1.14 million shares. If that breakout hits, then SHLD will set up to re-test or possibly take out its next major overhead resistance level at $55 to $60 a share.

I would avoid SHLD or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 50-day moving average at $44.72 a share with high volume. If we get that move, then SHLD will set up to re-test or possibly take out its next major support levels at $42.50 to $40 a share. Any high-volume move below $40 will then put its 52-week low of $38.40 into range for shares of SHLD.

DreamWorks Animation

Another earnings short-squeeze prospect is motion pictures maker DreamWorks Animation ( DWA), which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect DreamWorks Animation to report revenue of $216.04 million on a loss of 6 cents per share.

During the last quarter, DreamWorks Animation reported revenue of $186.3 million, and GAAP reported sales were 16% higher than the prior-year quarter's $160.8 million. The company reported EPS of 29 cents per share, and GAAP EPS of 29 cents per share was 26% higher than the prior-year quarter's 23 cents per share.

The current short interest as a percentage of the float for DreamWorks Animation is extremely high at 26.6%. That means that out of the 65.90 million shares in the tradable float, 17.37 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 1.9%, or by about 326,000 shares. If the shorts are caught leaning too strong into a bullish quarter, then shares of DWA could explode higher post-earnings.

If you liked this article you might like

Activist Seeks UGG-Boots Maker Total Board Takeover After No Sale Emerges

UGG Boots Maker Sets Deadline for Boardroom Battle as Activists Hover

Emboldened by Buffalo Wild Wings Win, Activist Expands UGG Owner Battle

We Are In a Rare Moment, Explains Jim Cramer