5 Earnings Short-Squeeze Plays: Twitter, Sarepta Therapeutics Included

Short-sellers despise being caught short a stock that announces a bullish earnings report. When this happens, we often see a tradable short squeeze develop as the bears move quickly to cover some of their positions. Even the best short-sellers know, it's never a great idea to get caught short once a bullish earnings report initiates a short-covering rally.

This is why I scan the market every week for heavily shorted stocks that are about to release earnings. You only need to find a few of these plays every week to help rack up supercharged returns.

With that in mind, let's take a look at five stocks that could experience big short squeezes following any bullish earnings reports they release soon.

Twitter

My first earnings short-squeeze idea is global social media player Twitter (TWTR) , which is set to release numbers Wednesday before the market open. Wall Street analysts, on average, expect Twitter to report revenue of $511.91 million on earnings of 1 cent per share.

The current short interest as a percentage of the float for Twitter is pretty high, at 11.3%. That means out of the 616.43 million shares in the tradable float, 70.17 million shares are sold short by the bears.

I would wait until after Twitter reports, then look for long-biased trades if this stock manages to break out above its 50-day at $15.21 and then above more near-term resistance levels at $15.37 to $15.75 with volume that hits near or above 17.55 million shares. If that breakout hits post-earnings, this stock will set up to re-test or possibly take out its next major overhead resistance levels at $16.50 to $16.90, or even its 200-day at $17.57 a share.

Sarepta Therapeutics

Another potential earnings short-squeeze trading opportunity is biotechnology player Sarepta Therapeutics (SRPT) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Sarepta Therapeutics to report revenue of $13.86 million on a loss of 36 cents per share.

The current short interest as a percentage of the float for Sarepta Therapeutics is very high at 21.6%. That means out of the 48.19 million shares in the tradable float, 10.44 million shares are sold short by the bears.

I would wait until Sarepta Therapeutics reports, then look for long-biased trades if this stock manages to break out above some near-term resistance levels at $34.85 to $36 with volume that hits near or above 2.09 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 $38.55 to $39.36, or even $43 a share.

Acadia Healthcare

Another potential earnings short-squeeze candidate is specialized health services player Acadia Healthcare (ACHC) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Acadia Healthcare to report revenue of $690.75 million on earnings of 46 cents per share.

The current short interest as a percentage of the float for Acadia Healthcare is high, at 23.8%. That means out of the 76.70 million shares in the tradable float, 18.32 million shares are sold short by the bears.

I would wait until after Acadia Healthcare reports, and then look for long-biased trades if this stock manages to break out above a key downtrend line that will start over $44 to $45 with volume that hits near or above 1.53 million 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 $47.40 to $50, or even $55 a share.

Valvoline

Another earnings short-squeeze prospect is automotive and industrial lubricants player Valvoline (VVV) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Valvoline to report revenue of $501.04 million on earnings of 34 cents per share.

The current short interest as a percentage of the float for Valvoline is extremely high at 44.4%. That means out of 34.38 million shares in the tradable float, 15.28 million shares are sold short by the bear.

I would wait until after Valvoline reports, then look for long-biased trades if this stock manages to break out above both its 50-day at $23.36 and its 20-day at $23.80 with volume that hits near or above 751,420 shares. If that breakout materializes post-earnings, this stock will set up to re-test or possibly take out its next major resistance level at its all-time high of $24.98 a share.

Wabash National

My final earnings short-squeeze play is heavy trucking player Wabash National (WNC) , which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect Wabash National to report revenue of $371.43 million on earnings of 27 cents per share.

The current short interest as a percentage of the float for Wabash National is very high at 28.2%. That means that out of the 58.74 million shares in the tradable float, 16.04 million shares are sold short by the bears.

I would wait until after Wabash National reports, then look for long-biased trades if this stock manages to break out above a key downtrend line that triggers over its 50-day at $20.55 to $20.80 and then over $21.16 with volume that hits near or above 1.19 million shares. If that breakout hits post-earnings, this stock will set up to re-test or possibly take out its next major resistance level at its 52-week high of $22.14 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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