Fusion-IO

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Another earnings short-squeeze prospect is datacenter solutions provider Fusion-IO ( FIO), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Fusion-IO to report revenue of $110.20 million on a loss of 3 cents per share.

>>5 Tech Stocks Rising on Big Volume

The current short interest as a percentage of the float for Fusion-IO is extremely high at 46.7%. That means that out of the 88.09 million shares in the tradable float, 30.03 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 6.4%, or by about 1.80 million shares. If the bears are caught pressing their bets into a strong quarter, then shares of FIO could explode sharply higher post-earnings as the shorts rush to cover some of their bets.

From a technical perspective, FIO is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock has been uptrending strong for the last month and change, with shares moving higher from its low of $12.72 to its recent high of $15.45 a share. During that move, shares of FIO have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of FIO within range of triggering a major breakout trade.

If you're bullish on FIO, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some key overhead resistance levels at $15.45 to $15.90 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 4.02 million shares. If that breakout triggers, then FIO will set up to re-fill some of its previous gap down zone from May that started near $18.50 a share. Any high-volume move above $18.50 to $18.74 will then put $22.50 to $25 into range for shares of FIO.

I would avoid FIO 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 of $14.29 a share and then below more support at $14.26 a share with high volume. If we get that move, then FIO will set up to re-test or possibly take out its next major support levels at $13.60 to $12.72 a share.

If you liked this article you might like

The Deal: Digital Generation Sells TV Unit to Extreme Reach

5 Stocks With Big Insider Buying

Top Insider Trades: KMI DGIT NCT VTSS

5 Stocks Setting Up to Break Out