5 Earnings Short-Squeeze Trade Ideas

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. Even the best short-sellers know, it's never a great idea to stay short once a bullish earnings report sparks a big short-covering rally.

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 every week to help enhance your portfolio returns.

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

Five Below Inc.

My first earnings short-squeeze trade idea is specialty value retailer Five Below (FIVE) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Five Below to report revenue of $387.65 million on earnings of 89 cents per share.

The current short interest as a percentage of the float for Five Below is very high at 16.4%. That means that out of the 53.47 million shares in the tradable float, 8.76 million shares are sold short by the bears.

I would wait until after Five Below reports, and then look for long-biased trades if this stock manages to break out above some near-term resistance at $40.02 to $40.42 with volume that hits near or above 1.19 million 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 its 200-day moving average of $42.16 to $42.62, or even $44 to $45 a share.

Lands' End Inc.

Another potential earnings short-squeeze trading opportunity multi-channel retailer Lands' End (LE) , which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect Lands' End to report revenue of $459.43 million on earnings of 35 cents per share.

The current short interest as a percentage of the float for Lands' End is extremely high at 39.9%. That means that out of the 9.83 million shares in the tradable float, 3.92 million shares are sold short by the bears.

I would wait until after Lands' End reports, and then look for long-biased trades if this stock manages to break out above some near-term resistance at $19.95 to $20.65 with volume that hits near or above 130,485 shares. If that breakout develops post-earnings, then this stock will set up to re-test or possibly take out its next key resistance levels at $23 to $24, or even $25 to $26 a share.

Cheetah Mobile Inc.

Another potential earnings short-squeeze candidate is technology player Cheetah Mobile (CMCM) , which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect Cheetah Mobile to report revenue of $177.31 million on earnings of 6 cents per share.

The current short interest as a percentage of the float for Cheetah Mobile is very high 19.6%. That means that out of the 27.97 million shares in the tradable float, 5.48 million shares are sold short by the bears.

I would wait until after Cheetah Mobile reports, and then look for long-biased trades if this stock manages to break out above some key resistance at $13.80 with volume that hits near or above 532,998 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 $15 to $15.80, or even $16 to $17 a share.

Duluth Holdings Inc.

Another earnings short-squeeze prospect is apparel and accessories player Duluth Holdings (DLTH) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Duluth Holdings to report revenue of $163.10 million on earnings of 34 cents per share.

The current short interest as a percentage of the float for Duluth Holdings is very high at 22.3%. That means that out of 9.45 million shares in the tradable float, 2.11 million shares are sold short by the bear.

I would wait until after Duluth Holdings reports, and then look for long-biased trades if this stock manages to break out above some near-term resistance levels at $19.36 to its 20-day moving average of $19.77 and then above $20 with volume that hits near or above 225,041 shares. If that breakout kicks off post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $22.13 to $23, or even $24 to $26 a share.

HealthEquity Inc.

My final earnings short-squeeze play is healthcare information services player HealthEquity (HQY) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect HealthEquity to report revenue of $45.59 million on earnings of 4 cents per share.

The current short interest as a percentage of the float for HealthEquity sits at 4.9%. That means that out of the 48.47 million shares in the tradable float, 2.37 million shares are sold short by the bears.

I would wait until after HealthEquity reports, and then look for long-biased trades if this stock manages to break out above some key resistance levels at $46.68 to its all-time high of $49.25 with volume that hits near or above 527,021 shares. If that breakout hits post-earnings, then this stock will set up to enter new all-time-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $55 to $60, or even $65 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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