5 Earnings Plays Setting Up to Squeeze the Bears: Tesla, Shake Shack & More

Stock market bears hate being caught short a stock that announces a positive earnings report. When this happens, we often see a tradable short squeeze develop as the bears scramble to cover their positions. Even the best short-sellers know, it's never a great idea to get caught short once a bullish earnings report kicks off a short-covering rally.

This is why I scan the market every week for heavily shorted stocks that are set 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, here are five:

Shake Shack

My first earnings short-squeeze trading opportunity is restaurants operator Shake Shack (SHAK) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Shake Shack to report revenue of $74.72 million on earnings of 8 cents per share.

The current short interest as a percentage of the float for Shake Shack is extremely high at 50.8%. That means that out of the 15.54 million shares in the tradable float, 7.89 million shares are sold short by the bears.

I would wait until after Shake Shack reports, and then look for long-biased trades if this stock manages to clear a key downtrend line that starts over $34.54 to its 200-day at $35.24 with volume that hits near or above 656,247 shares. If that breakout develops post-earnings, then this stock will set up to make a run at its next key resistance levels at $37.65 to $39.70 a share.

Wingstop

Another potential earnings short-squeeze play is restaurants operator Wingstop (WING) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Wingstop to report revenue of $24.17 million on earnings of 16 cents per share.

The current short interest as a percentage of the float for Wingstop is extremely high at 26.4%. That means that out of the 28.46 million shares in the tradable float, 7.53 million shares are sold short by the bears.

I would wait until after Wingstop reports, and then look for long-biased trades if this stock manages to break out above a key downtrend line that will trigger over $30 to $30.28 with volume that hits near or above 519,140 shares. If that breakout hits post-earnings, then this stock will set up to re-test or possibly take out its next major resistance level at its all-time high of $33.42 a share.

Continental Resources

Another potential earnings short-squeeze candidate is independent oil and gas player Continental Resources (CLR) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Continental Resources to report revenue of $643.85 million on earnings of 3 cents per share.

The current short interest as a percentage of the float for Continental Resources is very high at 22.8%. That means that out of the 82.79 million shares in the tradable float, 18.90 million shares are sold short by the bears.

I would wait until after Continental Resources reports, and then look for long-biased trades if this stock manages to break out above both its 20-day at $44.14 and its 50-day at $44.42 with volume that hits near or above 2.67 million shares. If that breakout hits post-earnings, then this stock will set up to re-test or possibly take out its next major resistance levels at its 200-day of $48.18 to $49.36, or even $53.50 a share.

Tesla

Another earnings short-squeeze prospect is electric car player Tesla (TSLA) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Tesla to report revenue of $2.6 billion on a loss of 81 cents per share.

The current short interest as a percentage of the float for Tesla is extremely high at 26.4%. That means that out of 119.41 million shares in the tradable float, 31.58 million shares are sold short by the bear.

I would wait until after Tesla reports, and then look for long-biased trades if this stock manages to break out above its 52-week high of $327.66 with volume that hits near or above 5.75 million shares. If that breakout fires 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 are $350 to $375 a share.

http://www.thestreet.com/story/14116526/1/here-come-tesla-earnings.html

http://www.thestreet.com/story/14116701/1/tesla-has-run-down-and-backed-over-shortsellers-this-year.html

Dunkin' Brands Group

My final earnings short-squeeze trade idea is quick service restaurants player Dunkin' Brands Group (DNKN) , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Dunkin' Brands Group to report revenue of $192.17 million on earnings of 48 cents per share.

The current short interest as a percentage of the float for Dunkin' Brands Group is notable at 9.9%. That means that out of the 86.76 million shares in the tradable float, 8.65 million shares are sold short by the bears.

I would wait until after Dunkin' Brands Group reports, and then look for long-biased trades if this stock manages to break out above some near-term resistance levels at $57.80 to its 52-week high of $58.43 with volume that hits near or above 1.40 million shares. If that breakout materializes 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 are $65 to $70, or even $75 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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