Family Dollar Stores
Another earnings short-squeeze prospect is self-service retail discount store operator Family Dollar Stores (FDO), which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Family Dollar Stores to report revenue of $2.77 billion on earnings of 90 cents per share.
The current short interest as a percentage of the float for Family Dollar Stores stands at 4.9%. That means that out of the 85.77 million shares in the tradable float, 4.25 million shares are sold short by the bears. If this company can deliver the earnings news the bulls are looking for, then shares of FDO could easily rip higher post-earnings as the bears rush to cover some of their bets.
From a technical perspective, FDO is currently trending below its 50-day and is 200-day moving averages, which is bearish. This stock has been downtrending badly for the last four months, with shares moving lower from its high of $71.11 to its recent low of $57.28 a share. During that downtrend, shares of FDO have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of FDO have now moved into oversold territory, since its current relative strength index reading is 30. Oversold can always get more oversold, but it's also an area where a stock can rebound sharply higher from.
If you're bullish on FDO, 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 at $59.53 a share and then once it takes out its 50-day moving average of $61.65 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 2.17 million shares. If that breakout hits, then FDO will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $66.37 a share to around $67.50 to $68 a share.
I would simply avoid FDO or look for short-biased trades if after earnings it fails to trigger that breakout and then takes out its 52-week low of $57.28 a share with high volume. If we get that move, then FDO will set up to enter new 52-week-low territory, which is bearish technical price action. Some possible downside targets off that move are $53 to $50 a share, or even $47 a share.