Cree

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Another potential earnings short-squeeze candidate is Cree ( CREE), a provider of lighting-class LED products, lighting products and semiconductor products, which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Cree to report revenue of $342.76 million on earnings of 34 cents per share.

The current short interest as a percentage of the float for Cree is pretty high at 12.4%. That means that out of the 113.60 million shares in the tradable float, 14.24 million shares are sold short by the bears. This stock has a history of explosive moves higher when it reports solid numbers. If Cree can give the bulls what they're looking for, then we could see another monster squeeze this week.

From a technical perspective, CREE is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending modestly for the last month, with shares moving higher from its low of $48.40 to its recent high of $55.55 a share. During that uptrend, shares of CREE have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of CREE within range of triggering a major breakout trade post-earnings.

If you're bullish on CREE, 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 $55.55 to $55.66 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 2.53 million shares. If we get that breakout, then CREE will set up to re-fill some of its previous gap down zone from February of 2011 that started near $65 a share. This stock could even trade above $70 if the quarter is a blowout.

I would avoid CREE 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 $52.04 to its 50-day at $50.57 a share with high volume. If we get that move, then CREE will set up to re-test or possibly take out its next major support levels $48.40 to $43 a share.

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