JA Solar

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My first earnings short-squeeze play is solar power player JA Solar ( JASO), which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect JA Solar to report revenue of $250.42 million on a loss of 54 cents per share.

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The current short interest as a percentage of the float JA Solar is pretty high at 15%. That means that out of the 30.82 million shares in the tradable float, 4.06 million shares are sold short by the bears. This is a big short interest on a stock with relatively low tradable float. Any bullish earnings news could easily spark a large short-covering really for shares of JASO post-earnings.

From a technical perspective, JASO is currently trending below its 50-day moving average and above its 200-day moving average, which is neutral trendwise. This stock has been downtrending over the last month and change, with shares falling from its high of $9.91 to its low of $7.28 a share. During that move, shares of JASO have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of JASO have started to bounce higher over the last week, and the stock is now moving within range of triggering a near-term breakout trade post-earnings.

If you're bullish on JASO, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 50-day moving average at $8.03 a share and then once it takes out more resistance at $8.58 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 1.96 million shares. If that breakout triggers, then JASO will set up to re-test or possibly take out its next major overhead resistance levels at $9.60 to $9.91 a share. Any high-volume move above those levels will then put its 52-week high at $11.40 into range for shares of JASO.

I would simply avoid JASO or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some key near-term support levels at $7.28 to $6.83 a share with high volume. If we get that move, then JASO will set up to re-test or possibly take out its next major support levels $5.90 to $5.34 a share.

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