Finish Line

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One potential earnings short-squeeze candidate is mall-based specialty retailer of athletic footwear, apparel and accessories Finish Line ( FINL), which is set to release numbers on Friday before the market open. Wall Street analysts, on average, expect Finish Line to report revenue of $344.22 million on earnings of 16 cents per share.

Just recently, an analyst for Stern Agee reduced his earnings outlook for Finish Line, saying the company is losing focus with its core customer.

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The current short interest as a percentage of the float for Finish Line is pretty high at 9.7%. That means that out of the 48.12 million shares in the tradable float, 4.69 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 FINL post-earnings.

From a technical perspective, FINL is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been trending sideways for the last two months, with shares moving between $20.47 on the downside and $22.26 on the upside. A high-volume move above the upper-end of its recent range could trigger a breakout trade for shares of FINL post-earnings.

If you're bullish on FINL, 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 $21.63 to $22.26 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 586,106 shares. If we get that breakout, then FINL will set up to re-test or possibly take out its next major overhead resistance levels at $24.65 to $25.76 a share. Any high-volume move above those levels will give FINL a chance to tag $30 a share.

I would avoid FINL or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 50-day at $20.54 a share and its 200-day at $19.85 a share with high volume. If we get that move, then FINL will set up to re-test or possibly take out its next major support levels at $19 to $18 a share. Any high-volume move below those levels will then put $17.50 to $17 into range for shares of FINL.

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