Schnitzer Steel Industries

Another earnings short-squeeze prospect is recycled ferrous metal products manufacturer and export player Schnitzer Steel Industries (SCHN), which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Schnitzer Steel Industries to report revenue of $665.52 million on earnings of 10 cents per share.

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The current short interest as a percentage of the float for Schnitzer Steel Industries is very high at 12.6%. That means that out of the 25.20 million shares in the tradable float, 3.19 million shares are sold short by the bears. This is a large short interest on a stock with a very low tradable float. Any bullish earnings news could easily send shares of SCHN ripping higher post-earnings as the bears rush to cover some of their bets.

From a technical perspective, SCHN is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock recently formed a double bottom chart pattern at $24.58 to $24.71 a share. Following that bottom, shares of SCHN have started to uptrend and move back above both of its 50-day and 200-day moving averages. That move has now pushed shares of SCHN within range of triggering a near-term breakout trade post-earnings.

If you're bullish on SCHN, 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 $29.56 to $29.97 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 298,570 shares. If that breakout hits, then SCHN will set up to re-test or possibly take out its next major overhead resistance levels at its 52-week high of $33.32 a share. Any high-volume move above that level will then give SCHN a chance to tag $40 a share.

I would simply avoid SCHN or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 200-day at $27.34 a share to its 50-day at $26.63 a share with high volume. If we get that move, then SCHN will set up to re-test or possibly take out its next major support levels at $24.50 to its 52-week low of $23.07 a share, or even $21.75 a share.

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