5 Stocks Set to Soar on Bullish Earnings

Short-sellers hate being caught short a stock that reports a blowout quarter. When this happens, we often see a tradable short squeeze develop as the bears rush to cover their positions to avoid big losses. Even the best short-sellers know that it's never a great idea to stay short once a bullish earnings report sparks a big short-covering rally.

Short-squeeze candidates are something that I tweet about on a regular basis. These are also the exact type of stocks that I love to trade and alert to my subscribers in real- time.

This is why I scan the market for heavily shorted stocks that are about to report earnings. You only need to find a few of these stocks in a year to help enhance your portfolio returns -- the gains become so outsized in such a short time frame that your profits add up quickly.

That said, let's not forget that stocks are heavily shorted for a reason, so you have to use trading discipline and sound money management when playing earnings short-squeeze candidates. It's important that you don't go betting the farm on these plays and that you manage your risk accordingly. Sometimes the best play is to wait for the stock to break out following the report before you jump in to profit off a short squeeze. This way, you're letting the trend emerge after the market has digested all of the news.

Of course, sometimes the stock is going to be in such high demand that you risk missing a lot of the move by waiting. That's why it can be worth betting prior to the report -- but only if the stock is acting very bullish technically and you have a very strong conviction that it is going to rip higher. Just remember that even when you have that conviction and have done your due diligence, the stock can still get hammered if Wall Street doesn't like the numbers or guidance.

If you do decide to bet ahead of a quarter, then you might want to use options to limit your capital exposure. Heavily shorted stocks are usually the names that make the biggest post-earnings moves and have the most volatility. I personally prefer to wait until all the earnings-related news is out for a heavily shorted stock and then jump in and trade the prevailing trend.

With that in mind, let's take a look at several stocks that could experience big short squeezes when they report earnings this week.

Accelerate Diagnostics

My first earnings short-squeeze play is in vitro diagnostics player Accelerate Diagnostics  (AXDX) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Accelerate Diagnostics to report revenue of $10,000 on a loss of 28 cents per share.

The current short interest as a percentage of the float for Accelerate Diagnostics is very high at 27.2%. That means that out of the 21.39 million shares in the tradable float, 5.82 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 2.8%, or by about 158,000 shares. If the bears get caught pressing their bets into a bullish quarter, then this stock could easily soar sharply higher post-earnings as the bears move fast to cover some of their trades.

From a technical perspective, Accelerate Diagnostics is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last month and change, with shares moving lower off its high of $15.17 a share to its recent low of $11.30 a share. During that downtrend, shares of Accelerate Diagnostics have been consistently making lower highs and lower lows, which is bearish technical price action. That said, this stock has now started to find some support right above some a key previous support level at $11 a share.

If you're bullish on Accelerate Diagnostics, 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 $12 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 227,024 shares. If that breakout triggers post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at its 20-day moving average of $12.76 to its 50-day moving average of $13.09, or even $13.87 to $15 a share.

I would simply avoid Accelerate Diagnostics 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 $11 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its next major support level at its 52-week low of $10.29 a share. Any high-volume move below $10.29 will push this stock into new 52-week-low territory, which is bearish technical price action.

Nvidia

Another potential earnings short-squeeze trade idea is specialized semiconductor player Nvidia  (NVDA) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Nvidia to report revenue $1.27 billion on earnings of 32 cents per share.

The current short interest as a percentage of the float for Nvidia is pretty high at 12.6%. That means that out of the 512.78 million shares in the tradable float, 64.81 million shares are sold short by the bears.

From a technical perspective, Nvidia is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong over the last three months and change, with shares moving higher off its low of $24.66 a share to its recent high of $37.46 a share. During that uptrend, shares of Nvidia have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed this stock within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on Nvidia, then I would wait until after its report and look for long-biased trades if this stock manages to break above its 20-day moving average of $36.14 a share to some more key resistance levels at $37 to its 52-week high of $37.46 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 8.52 million shares. If that breakout kicks off post-earnings, then this stock will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $40 to $45, or even $50 a share.

I would simply avoid Nvidia 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 levels at its 50-day moving average of $34.84 a share to some more near-term support at $34.40 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its next major support levels at $33 to $32, or even $31 to its 200-day moving average of $29.11 a share.

Teladoc

Another potential earnings short-squeeze candidate is health care information services player Teladoc  (TDOC) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Teladoc to report revenue of $26.64 million on a loss of 38 cents per share.

The current short interest as a percentage of the float for Teladoc is extremely high at 24.1%. That means that out of the 17 million shares in the tradable float, 4.09 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of Teladoc could easily rip sharply higher post-earnings as the bears move fast to cover some of their positions.

From a technical perspective, Teladoc is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been uptrending over the last two months, with shares moving higher off its low of $9.08 a share to its high of $12.49 a share. During that uptrend, this stock has been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of Teladoc within range of triggering a big breakout trade post-earnings.

If you're bullish on Teladoc, 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 $12 to $12.50 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 276,160 shares. If that breakout fires off post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $14 to $15, or even $15.85 to $16.25 a share.

I would avoid Teladoc 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 levels at $11 to $10.60 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its next major support levels at $9.80 to its 52-week low of $9.08 a share.

ConforMIS

Another earnings short-squeeze prospect is medical technology player ConforMIS  (CFMS) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect ConforMIS to report revenue of $19.23 million on a loss of 38 cents per share.

The current short interest as a percentage of the float for ConforMIS is pretty high at 11.8%. That means that out of 35.09 million shares in the tradable float, 4.15 million shares are sold short by the bear. The bears have also been increasing their bets from the last reporting period by 4.5%, or by about 177,000 shares. If the bears get caught pressing their bets into a bullish quarter, then this stock could easily rip sharply higher post-earnings as the bears rush to cover some of their trade.

From a technical perspective, ConforMIS is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last few weeks, with shares moving lower off its high of $13.83 a share to its recent low of $11.02 a share. During that downtrend, this stock has been making mostly lower highs and lower lows, which is bearish technical price action.

If you're bullish on ConforMIS, 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 $11.98 a share to its 20-day moving average of $12.40 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 341,282 shares. If that breakout takes hold post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $13.83 to $14.50, or even its 200-day moving average of $15.94 a share.

I would simply avoid ConforMIS 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 levels at $11.02 to $10.14 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its next major support levels at $9 to $8.70, or even $8 a share.

CorEnergy Infrastructure

My final earnings short-squeeze trading opportunity is energy infrastructure real estate investment trust CorEnergy Infrastructure  (CORR) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect CorEnergy Infrastructure to report revenue of $22.63 million on earnings of $1.04 per share.

The current short interest as a percentage of the float for CorEnergy Infrastructure is pretty high at 10.7%. That means that out of the 11.91 million shares in the tradable float, 1.27 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 18.8%, or by about 202,000 shares. If the bears get caught pressing their bets into a strong quarter, then this stock could easily jump sharply higher post-earnings as the bears scramble to cover some of their positions.

From a technical perspective, CorEnergy Infrastructure is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been trending sideways and consolidating over the last month and change, with shares moving between $22.38 on the upside and $18.22 on the downside. This stock is now starting to spike higher off its 20-day moving average of $20.90 a share. That spike is quickly pushing shares of CorEnergy Infrastructure within range of triggering a big breakout trade post-earnings above some key near-term overhead resistance levels.

If you're in the bull camp on CorEnergy Infrastructure 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 $21.89 to $22.38 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 199,098 shares. If that breakout hits post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $25 to $26, or even $28 to $30 a share.

I would avoid CorEnergy Infrastructure or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 20-day moving average of $20.90 a share to some more near-term support at $20.13 to its 200-day moving average of $19.72 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its next major support levels at its 200-day moving average of $18.73 to $18.22, or even $17 to $15 a share.

Disclosure: This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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