With that in mind, here's a look at several stocks that could experience big short squeezes when they report earnings this week.


My first earnings short-squeeze trade idea is Illumina ( ILMN), a developer and manufacturer of life science tools and integrated systems, which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect Illumina to report revenue of $343.56 million on earnings of 40 cents per share.

The current short interest as a percentage of the float Illumina is very large at 18.9%. That means that out of the 123.32 million shares in the tradable float, 23.31 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of ILMN could soar sharply higher post-earnings as the bears rush to cover some of their short positions.

>>5 Stocks Poised for Breakouts

From a technical perspective, ILMN 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 few weeks, with shares moving higher from its low of $72.77 to its recent high of $83.50 a share. During that uptrend, shares of ILMN have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of ILMN within range of triggering a big breakout trade post-earnings.

If you're bullish on ILMN, 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 $83.50 to its 52-week high at $85.81 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 952,865 shares. If that breakout hits, then ILMN will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets off that breakout are $95 to $100 a share.

I would simply avoid ILMN 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 $80.09 a share with high volume. If we get that move, then ILMN will set up to re-test or possibly take out its next major support levels at $76 to $72.77 a share.

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