JDS Uniphase

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One potential earnings short-squeeze candidate is network communications equipment player JDS Uniphase ( JDSU), which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect JDS Uniphase to report revenue of $430.59 million on earnings of 13 cents per share.

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The current short interest as a percentage of the float for JDS Uniphase is notable at 4%. That means that out of the 235.87 million shares in the tradable float, 7.91 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of JDSU could see a nice pop post-earnings as the bears rush to cover some of their short positions.

From a technical perspective, JDSU 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 moving higher from its low of $12.36 to its recent high of $15.31 a share. During that uptrend, shares of JDSU have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of JDSU within range of triggering a major breakout trade post-earnings.

If you're bullish on JDSU, 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 $15.31 to $15.55 a share and then once it takes out its 52-week high at $15.63 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 3.54 million shares. If that breakout triggers, then JDSU will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets off that breakout are $20 to $22.40 a share.

I would avoid JDSU or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 50-day at $14.50 a share and then below more near-term support at $14.24 a share with high volume. If we get that move, then JDSU will set up to re-test or possibly take out its next major support levels at $13.57 to $13 a share. Any high-volume move below those levels will then put $12.40 to $12 into range for shares of JDSU.

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