A. Schulman

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My final earnings short-squeeze trade idea tpday is suppler of plastic compounds, resins and services A. Schulman ( SHLM), which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect A. Schulman to report revenue of $576.10 million on earnings of 65 cents per share.

This company has beaten Wall Street estimates three times in the last four quarters, so another solid beat this quarter could easily get this stock juiced to the upside post-earnings.

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The current short interest as a percentage of the float for A. Schulman sits at 2.4%. That means that out of the 28.70 million shares in the tradable float, 699,000 shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 5.8%, or by about 661,000 shares. If the bears are caught pressing their bets into a bullish quarter, then shares of SHLM could spike notably higher post-earnings as the shorts rush to cover some of their bets.

From a technical perspective, SHLM is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock has been downtrending for the last month and change, with shares moving lower from its high of $29.95 to its recent low of $25.53 a share. During that move, shares of SHLM have been mostly making lower highs and lower lows, which is bearish technical price action. That said, shares of SHLM have just started to bounce off that $25.53 low and are now quickly moving within range of triggering a near-term breakout trade.

If you're in the bull camp on SHLM, 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 at $27.76 a share and then above more overhead resistance at $29.95 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 190,788 shares. If we get that breakout, then SCHN will set up to re-test or possibly take out its next major overhead resistance levels at $32.50 to $33.14 a share. Any high-volume move above that level will then put $35 to $40 into range for shares of SHLM.

I would avoid SHLM 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 $27.54 a share with high volume. If we get that move, then SHLM will set up to re-test or possibly take out its next major support levels at $25.53 to $24.61 a share, or even $23 a share. Any high-volume move below $23 could then send SHLM towards $20 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 Delafield, Wis.


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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., 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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