Sears Holdings

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Another potential earnings short-squeeze play is specialty retail stores operator Sears Holdings ( SHLD), which is set to release its numbers on Thursday before the market open. Wall Street analysts, on average, expect Sears Holdings to report revenue of $8.37 billion on a loss of 60 cents per share.

During the last quarter, this company reported revenue of $12.26 billion and GAAP reported sales were 1.8% lower than the prior-year quarter's $12.48 billion. Also during the last quarter, non-GAAP EPS was $1.12 per share and GAAP EPS was -$4.62 versus -22.63 per share for the prior-year quarter.

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The current short interest as a percentage of the float for Sears Holdings is pretty high at 10.1%. That means that out of the 43.31 million shares in the tradable float, 7.81 million shares are sold short by the bears. This is a decent short interest on a stock with a relatively low float. Any bullish earnings news could easily spark a sharp short-covering rally for shares of SHLD post-earnings.

From a technical perspective, SHLD is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last month and change, with shares pushing higher from its low of $45.61 to its recent high of $60.72 a share. During that uptrend, shares of SHLD have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of SHLD within range of triggering a near-term breakout trade post-earnings.

If you're in the bull camp on SHLD, 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 $60.72 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 698,916 shares. If that breakout triggers, then SHLD will set up to re-test or possibly take out its next major overhead resistance levels at $65 to its 52-week high at $68.77 a share.

I would simply avoid SHLD 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 $56.54 a share with high volume. If we get that move, then SHLD will set up to re-test or possibly take out its 50-day at $51.64 a share or its 200-day at $49.93 a share.

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