5 Stocks Everyone Hates -- but You Should Love

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.

Oracle

My first earnings short-squeeze trade idea is application software player Oracle  (ORCL) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Oracle to report revenue of $8.70 billion on earnings of 58 cents per share.

The current short interest as a percentage of the float for Oracle stands at 1.2%. That means that out of the 3 billion shares in the tradable float, 36.89 million shares are sold short by the bears.

From a technical perspective, Oracle is currently trending below its 50-day moving average and above its 200-day moving average, which is neutral trendwise. This stock has been downtrending a bit over the last month and change, with shares sliding lower off its high of $41.91 a share to its recent low of $39.68 a share. During that downtrend, shares of Oracle have been making mostly lower highs and lower lows, which is bearish technical price action.

If you're bullish on Oracle, 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 its 50-day moving average of $41.08 a share to more key resistance levels at $41.91 to $42.50 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 12.85 million shares. If that breakout fires off post-earnings, then this stock will set up to enter new 52-week-high territory above $42 a share, which is bullish technical price action. Some possible upside targets off that move are $44.50 to $46, or even $48 to $50 a share.

I would simply avoid Oracle 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 $39.68 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 $38.89 a share to $38, or even $36 to $34 a share.

Apogee Enterprises

Another potential earnings short-squeeze play is building materials player Apogee Enterprises  (APOG) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Apogee Enterprises to report revenue $268.05 million on earnings of 67 cents per share.

The current short interest as a percentage of the float for Apogee Enterprises is extremely high at 16%. That means that out of the 28.09 million shares in the tradable float, 4.52 million shares are sold short by the bears.

From a technical perspective, Apogee Enterprises is currently trending above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock has been consolidating and trending sideways over the last two months and change, with shares moving between $44.03 on the downside and $49.26 on the upside. Any high-volume move above the upper-end of its recent sideways trending chart pattern post-earnings could trigger a big breakout trade for shares of Apogee Enterprises.

If you're in the bull camp on Apogee Enterprises, then I would wait until after its report and look for long-biased trades if this stock manages to break out above both its 50-day moving average of $47.28 a share and its 20-day moving average of $47.74 a share and then above more key resistance levels at $49 to $49.26 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 253,353 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 $53 to $54, or even its 52-week high of $58.36 a share.

I would simply avoid Apogee Enterprises or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some near-term support levels at $44.54 to its 200-day moving average of $43.38 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 $41 to $40, or even $39 to $38 a share.

Radiant Logistics

Another potential earnings short-squeeze candidate is third party logistics player Radiant Logistics  (RLGT) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Radiant Logistics to report revenue of $202.59 million on earnings of 3 cents per share.

The current short interest as a percentage of the float for Radiant Logistics sits at 2.9%. That means that out of the 31.68 million shares in the tradable float, 924,000 shares are sold short by the bears.

From a technical perspective, Radiant Logistics is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently formed a double bottom chart pattern, after shares found some buying interest at $2.86 to $2.87 a share. Following that potential bottom, this stock has started to spike a bit higher and trend within range of triggering a near-term breakout trade post-earnings above some key overhead resistance levels.

If you're bullish on Radiant Logistics, 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 its 50-day moving average of $3.11 a share to more resistance at $3.19 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 108,253 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 $3.30 to its 200-day moving average of $3.38 a share, or even $3.44 to $3.50 a share.

I would avoid Radiant Logistics 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 $2.97 to its 52-week low of $2.86 a share with high volume. If we get that move, then this stock will set up to enter new 52-week-low territory, which is bearish technical price action.

Lakeland Industries

Another earnings short-squeeze prospect is safety garments and accessories maker Lakeland Industries  (LAKE) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Lakeland Industries to report revenue of $22.01 million on earnings of 10 cents per share.

The current short interest as a percentage of the float for Lakeland Industries is notable at 3.1%. That means that out of 5.08 million shares in the tradable float, 160,000 shares are sold short by the bear.

From a technical perspective, Lakeland Industries is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending a bit over the last month and change, with shares moving lower off its high of $10.64 a share to its recent low of $9.14 a share. During that downtrend, shares of Lakeland Industries have been making mostly lower highs and lower lows, which is bearish technical price action.

If you're bullish on Lakeland Industries, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some key near-term overhead resistance levels at $10 to $10.35 a share and then above $10.64 to its 200-day moving average of $10.72 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 29,195 shares. If that breakout develops post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $11.50 to $12, or even $13 a share.

I would simply avoid Lakeland Industries or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some near-term support at $9.14 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 $8.50 to $8.10, or even its 52-week low of $8 a share.

Student Transportation

My final earnings short-squeeze trading opportunity is student transpiration and solutions provider Student Transportation  (STB) , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Student Transportation to report revenue of $163.67 million on earnings of 5 cents per share.

The current short interest as a percentage of the float for Student Transportation stands at 2.2%. That means that out of the 95.63 million shares in the tradable float, 2.17 million shares are sold short by the bears.

From a technical perspective, Student Transportation 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 four months and change, with shares moving higher off its low of $4.52 a share to its recent high of $5.80 a share. During that uptrend, this stock has been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of Student Transpiration within range of triggering a big breakout trade post-earnings above some key overhead resistance levels.

If you're in the bull camp on Student Transportation then I would wait until after its report and look for long-biased trades if this stock manages to break out above its new 52-week high of $5.80 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 111,439 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 breakout are $6.50 to $7, or even $7.50 to $8 a share.

I would avoid Student Transportation or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 50-day moving average of $5.34 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 $5 to $4.75, or even its 200-day moving average of $4.53 a share.

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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