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:
My first earnings short-squeeze play is social media player Snap (SNAP) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Snap to report revenue of $146.42 million on a loss of 21 cents per share.
The current short interest as a percentage of the float for Snap is rather high at 13%. That means that out of the 277.49 million shares in the tradable float, 36.30 million shares are sold short by the bears.
I would wait until after Snap reports, and then look for long-biased trades if this stock manages to break out above some near-term resistance levels at $24 to $24.40 with volume that hits near or above 28.79 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 $28 to its all-time high of $29.44 a share.