Lexmark International

My final earnings short-squeeze play is computer hardware player Lexmark International (LXK), which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect Lexmark International to report revenue of $929.45 million on earnings of $1.10 per share.

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The current short interest as a percentage of the float for Lexmark International is very high at 18.7%. That means that out of the 61.25 million shares in the tradable float, 11.51 million shares are sold short by the bears. This is a high short interest on a stock with a relatively low tradable float. If the bulls get the earnings news they're looking for, then shares of LXK could easily rip sharply higher post-earnings as the bears jump to cover some of their bets.

From a technical perspective, LXK 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 and consolidating for the last three months, with shares moving between $32.57 on the downside and $37.09 on the upside. Any high-volume move above the upper-end of its recent range post-earnings could trigger a big breakout trade for shares of LXK.

If you're in the bull camp on LXK, 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 of $35.32 a share to some more key overhead resistance levels at $36.61 to $37.09 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 779,518 shares. If that breakout hits, then LXK will set up to re-test or possibly take out its next major overhead resistance levels at $39.35 to its 52-week high at $41.45 a share. Any high-volume move above those levels will then give LXK a chance to tag $45 a share.

I would avoid LXK or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 200-day moving average of $33.44 a share to more key near-term support levels at $32.57 to $32.43 a share with high volume. If we get that move, then LXK will set up to re-test or possibly take out its next major support levels at $28.97 to $24 a share.

To see more potential earnings short squeeze plays, check out the Earnings Short-Squeeze Plays portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

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At the time of publication, author had no positions in stocks mentioned. Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

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