Scholastic

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Another potential earnings short-squeeze trade idea is childrenÂ’'s publishing, education, and media company Scholastic ( SCHL), which is set to release its numbers on Thursday before the market open. Wall Street analysts, on average, expect Scholastic to report revenue $299.70 million on a loss of 68 cents per share.

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The current short interest as a percentage of the float for Scholastic is very high at 13.3%. That means that out of the 27.7 million shares in the tradable float, 3.41 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 12.9%, or by about 388,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of SCHL could rip sharply higher post-earnings as the bears rush to cover some of their short bets.

From a technical perspective, SCHL is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been trending sideways for the last two months, with shares moving between $28.68 on the downside and $31.44 on the upside. Any high-volume move above the upper-end of its recent range could trigger a near-term breakout trade for shares of SCHL post-earnings.

If you're in the bull camp on SCHL, then I would wait until after its report and look for long-biased trades if this manages to break out above its 50-day moving average at $30.43 a share and then once it takes out more resistance at $31.44 a share high volume. Look for volume on that move that hits near or above its three-month average action of 170,081 shares. If that breakout hits, then SCHL will set up to re-test or possibly take out its next major overhead resistance levels at $33 to its 52-week high at $34.55 a share. Any high-volume move above those levels will then give SCHL a chance to tag $40 a share.

I would simply avoid SCHL or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 200-day at $29.15 a share and then once it takes out more key near-term support levels at $28.68 to $28.08 a share with high volume. If we get that move, then SCHL will set up to re-test or possibly take out its next major support levels at $27 to $26 a share.

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