SemiLEDs

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My final earnings short-squeeze trade idea is developer, manufacturer and seller of LED chips and LED components SemiLEDs ( LEDS), which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect SemiLEDS to report revenue of $5.17 million on a loss of 21 cents per share.

The current short interest as a percentage of the float for SemiLEDS is pretty high at 9.8%. That means that out of the 10.48 million shares in the tradable float, 1.02 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 26.9%, or by about 215,000 shares. If the bears are caught pressing their bets into a bullish quarter, then shares of LEDS could spike sharply higher post-earnings.

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From a technical perspective, LEDS is currently trending below its 50-day moving average and above its 200-day moving average, which is neutral trendwise. This stock has been uptrending for the last two months, with shares moving higher from its low of $1.28 to its recent high of $2.09 a share. During that uptrend, shares of LEDS have been mostly making higher lows and higher highs, which is bullish technical price action. That move now has LEDS trading within range of triggering a near-term breakout trade post-earnings.

If you're in the bull camp on LEDS, 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 $1.84 to $2.09 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 914,076 shares. If we get that breakout, then LEDS will set up to re-test or possibly take out its next major overhead resistance levels at $2.44 to its 52-week high at $2.82 a share. Any high-volume move above those levels will then give LEDS a chance to trend north of $3 a share.

I would avoid LEDS after earnings it fails to trigger that breakout, and then drops back below some key near-term support levels at $1.53 to $1.42 a share with high volume. If we get that action, then LEDS will set up to re-test or possibly take out its 200-day at $1.25 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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