PriceSmart

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My first earnings short-squeeze trade idea is international membership shopping warehouse clubs player PriceSmart ( PSMT), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect PriceSmart to report revenue of $568.33 million on earnings of 64 cents per share.

During the last quarter, this company reported revenue of $607.4 million and GAAP reported sales were 11% higher than the prior-year quarter's $548.4 million. Also during the last quarter, this company reported EPS of 82 cents per share and GAAP EPS was 82 cents per share, which was 22% higher than the prior-year quarter's 67 cents per share.

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The current short interest as a percentage of the float for PriceSmart is very high at 11.6%. That means that out of the 23.23 million shares in the tradable float, 2.17 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 2.2%, or by about 47,000 shares. If the bears are caught pressing their bets into a bullish quarter, then shares of PSMT could skyrocket higher post-earnings.

From a technical perspective, PSMT 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 four months, with shares soaring higher from its low of $70.02 to its recent high of $92.67 a share. During that move, shares of PSMT have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of PSMT within range of triggering a near-term breakout trade.

If you're bullish on PSMT, then I would wait until after its report and look for long-biased trades if this stock manages to break out to a new 52-week high above $92.67 a share with high volume. If PSMT takes out $92.67 a share before it reports earnings, then readjust to the new breakout price. Look for volume on that move that hits near or above its three-month average action of 128,851 shares. If that breakout triggers, then PSMT will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets off that breakout are $100 to $110 a share, or even $115 a share.

I would simply avoid PSMT or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below some near-term support levels at $90 a share to its 50-day at $87.97 a share with high volume. If we get that move, then PSMT will set up to re-test or possibly take out its next major support level at $85.85 to $82.97 a share. Any high-volume move below those levels will then put its 200-day at $80.08 into range for shares of PSMT.

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