Radian Group

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Another potential earnings short-squeeze play is residential mortgage insurance player Radian Group ( RDN), which is set to release its numbers on Thursday before the market open. Wall Street analysts, on average, expect Radian Group to report revenue of $211 million on a loss of 10 cents per share.

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This company recently reported that mortgage insurance delinquencies for September fell to 65,239 loans at the end of the month from 65,427 beginning primary delinquent inventory of loans. The company also reported $3.83 billion of primary new insurance was written in September.

The current short interest as a percentage of the float for Radian Group is extremely high at 25.8%. That means that out of the 160.34 million shares in the tradable float, 44.26 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of RDN could easily rip sharply higher post-earnings as the shorts jump to cover some of their bets.

From a technical perspective, RDN is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending for the last two months, with shares moving higher from its low of $12.42 to its recent high of $15.15 a share. During that uptrend, shares of RDN have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of RDN within range of triggering a major breakout trade post-earnings.

If you're in the bull camp on RDN, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 52-week high at $15.15 a share (or Wednesday's intraday high if higher) on high volume. Look for volume on that move that hits near or above its three-month average action of 4.15 million shares. If that breakout hits, then RDN will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $18 to $20, or even $22 a share.

I would simply avoid RDN or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops below some key near-term support levels at $14.23 a share to its 50-day moving average of $13.91 a share with high volume. If we get that move, then RDN will set up to re-test or possibly take out its next major support levels at $12.95 to $12.50 a share, or even its 200-day moving average of $11.91 a share.

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