5 Earnings Short-Squeeze Plays: Constellation, Bed Bath & Beyond Included

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 report earnings this week.

Schnitzer Steel

My first earnings short-squeeze play is basic materials player Schnitzer Steel (SCHN) , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Schnitzer Steel to report revenue of $388.85 million on earnings of 33 cents per share.

The current short interest as a percentage of the float for Schnitzer Steel sits at 5.9%. That means that out of the 26.26 million shares in the tradable float, 1.55 million shares are sold short by the bears.

I would wait until after Schnitzer Steel reports, and then look for long-biased trades if this stock manages to break out above some near-term resistance at $20.90 to its 20-day at $20.99 with volume that hits near or above 458,216 shares. If that breakout triggers post-earnings, this stock will set up to re-test or possibly take out its next major resistance levels at its 200-day at $22.12 to its 50-day at $23.05, or even $25 to $27.50 a share.

Constellation Brands

Another potential earnings short-squeeze trade idea is consumer goods player Constellation Brands (STZ) , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Constellation Brands to report revenue of $1.6 billion on earnings of $1.36 per share.

The current short interest as a percentage of the float for Constellation Brands stands at 2.9%. That means that out of the 147.40 million shares in the tradable float, 4.34 million shares are sold short by the bears.

I would wait until after Constellation Brands reports, and then look for long-biased trades if this stock manages to break out above some near-term resistance at $164 to $165.88 and then above some past resistance at $167.41 with volume that hits near or above 1.94 million shares. If that breakout fires off post-earnings, this stock will set up to re-test or possibly take out its 52-week high of $173.55 to $180 a share.

Fred's

Another potential earnings short-squeeze candidate is retail discount stores operator Fred's (FRED) , which is set to release numbers Thursday before the market open. Wall Street analysts, on average, expect Fred's to report revenue of $531.30 million on a loss of 16 cents per share.

The current short interest as a percentage of the float for Fred's is extremely high at 53.6%. That means that out of the 25.97 million shares in the tradable float, 13.93 million shares are sold short by the bears.

I would wait until after Fred's reports, and then look for long-biased trades if this stock manages to break out above some near-term resistance at $13.79 to its 20-day at $14.31 with volume that hits near or above 1.20 million shares. If that breakout develops post-earnings, this stock will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day of $15.27 to $16.22, or even $18 a share.

PriceSmart

Another earnings short-squeeze prospect is membership shopping warehouse clubs operator PriceSmart (PSMT) , which is set to release numbers Thursday after the market close. Wall Street analysts, on average, expect PriceSmart to report revenue of $797.83 million on earnings of 92 cents per share.

The current short interest as a percentage of the float for PriceSmart sits at 4.7%. That means that out of 24.39 million shares in the tradable float, 1.16 million shares are sold short by the bear.

I would wait until after PriceSmart reports, and then look for long-biased trades if this stock manages to break out above some near-term resistance levels at $94 to $94.08 and then above its 52-week high of $94.86 with volume that hits near or above 118,109 shares. If that breakout triggers post-earnings, this stock will set up to re-test or possibly take out its next major overhead resistance levels at $97 to $102, or even $105 to $110 a share.

Bed Bath & Beyond

My final earnings short-squeeze trade idea is home furnishing stores player Bed Bath & Beyond (BBBY) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Bed Bath & Beyond to report revenue of $3.5 billion on earnings of $1.77 per share.

The current short interest as a percentage of the float for Bed Bath & Beyond is notable at 7.9%. That means that out of the 142.47 million shares in the tradable float, 11.31 million shares are sold short by the bears.

I would wait until after Bed Bath & Beyond reports, and then look for long-biased trades if this stock manages to break out above some near-term resistance levels at its 50-day of $39.81 to $40 with volume that hits near or above 1.94 million shares. If that breakout fires off post-earnings, this stock will set up to re-test or possibly take out its next major overhead resistance levels at $41.83 to $42.22, or even its 200-day at $42.45 to $44 a share.

This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.

More from Stocks

A Guide to Investing in the Fast-Emerging Cannabis Industry

A Guide to Investing in the Fast-Emerging Cannabis Industry

Chart of the Day: Can Disney Catch Netflix?

Chart of the Day: Can Disney Catch Netflix?

Dow Surges More Than 540 Points on Strong Bank Earnings; Nasdaq Gains 2.9%

Dow Surges More Than 540 Points on Strong Bank Earnings; Nasdaq Gains 2.9%

Analysts Confident Netflix Can Restore Content Crown in 2019

Analysts Confident Netflix Can Restore Content Crown in 2019

UnitedHealth Group: A Steady Performer With Room to Run

UnitedHealth Group: A Steady Performer With Room to Run