My first earnings short-squeeze trade idea is 3D printing player 3D Systems (DDD), which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect 3D Systems to report revenue of $145.50 million on earnings of 15 cents per share.
The current short interest as a percentage of the float for 3D Systems is extremely high at 29.9%. That means that out of the 98.42 million shares in the tradable float, 27.07 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 8.8%, or by about 2.38 million shares. If the bears get caught pressing their bets into a bullish quarter, then shares of DDD could easily rip sharply higher post-earnings as the bears rush to cover some of their bets.
From a technical perspective, DDD is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last four months, with shares falling from its high of $97.28 to its recent low of $45.29 a share. During that downtrend, shares of DDD have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of DDD have started to rebound off its recent low of $45.29 and it's starting to move within range of triggering a near-term breakout trade post-earnings.
If you're bullish on DDD, 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 $52.85 to $55 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 5.70 million shares. If that breakout gets underway post-earnings, then DDD will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $61.31 a share to its 200-day moving average of $64.05 a share. Any high-volume move above those levels will then give DDD a chance to trend north of $65 a share.
I would simply avoid DDD or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some key near-term support at $45.29 a share with high volume. If we get that move, then DDD will set up to re-test or possibly take out its next major support levels at $41 to $35 a share. Any high-volume move below those levels will then give DDD a chance to trend below $35 and possibly hit $30 a share.