PetSmart

My final earnings short-squeeze trade idea is PetSmart ( PETM), a provider of product, services and solutions for pets, which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect PetSmart to report revenue of $1.89 billion on earnings of $1.21 per share.

The current short interest as a percentage of the float for PetSmart stands at 5.3%. That means that out of the 100.63 million shares in the tradable float, 5.68 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 15.8%, or by about 773,000 shares. If the bears are caught pressing their bets too aggressively into a bullish quarter, then we could easily see shares of PETM spike sharply higher post-earnings.

From a technical perspective, PETM is currently trending below both its 50-day and 200-day moving averages, which is bearish. That said, shares of PETM have started to bounce off its recent low of $61.58 a share. That bounce has started to push the stock within range of triggering a near-term breakout trade post-earnings.

If you're in the bull camp on PETM, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 50-day at $66.90 a share and its 200-day at $67.27 a share and then once it takes out more resistance at $67.73 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 1.24 million shares. If that breakout triggers, then PETM will set up to re-test or possibly take out its next major overhead resistance levels at $70.31 to $71.68 a share. Any high-volume move above those levels will then put its 52-week high of $72.75 into range for shares of PETM.

I would simply avoid PETM 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 at $64 a share with high volume. If we get that move, then PETM will set up to re-test or possibly take out its recent low of $61.58 a share.

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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