5 Earnings Short-Squeeze Plays: Snap, NVIDIA & 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:

Snap

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.

NVIDIA

Another potential earnings short-squeeze trade idea is semiconductor player NVIDIA (NVDA) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect NVIDIA to report revenue of $1.91 billion on earnings of 67 cents per share.

The current short interest as a percentage of the float for NVIDIA stands at 4.77%. That means that out of the 561.90 million shares in the tradable float, 26.81 million shares are sold short by the bears.

I would wait until after NVIDIA reports, and then look for long-biased trades if this stock manages to break out above some near-term resistance levels at $106.85 to $110 and then over $111.80 with volume that hits near or above 15.19 million shares. If that breakout hits post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $120.92 a share.

Diplomat Pharmacy

Another potential earnings short-squeeze candidate is specialty pharmacy player Diplomat Pharmacy (DPLO) , which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect Diplomat Pharmacy to report revenue of $1.08 billion on earnings of 15 cents per share.

The current short interest as a percentage of the float for Diplomat Pharmacy is very high at 19.2%. That means that out of the 44.95 million shares in the tradable float, 8.66 million shares are sold short by the bears.

I would wait until after Diplomat Pharmacy reports, and then look for long-biased trades if this stock manages to break out above a key resistance level at $16.39 with volume that hits near or above 954,229 shares. If that breakout hits post-earnings, then this stock will set up to re-fill some of its previous gap-down-day zone from last November that started near $23 a share.

INSYS Therapeutics

Another earnings short-squeeze prospect is specialty pharmaceutical player INSYS Therapeutics (INSY) , which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect INSYS Therapeutics to report revenue of $37.78 million on a loss of 10 cents per share.

The current short interest as a percentage of the float for INSYS Therapeutics is extremely high at 55.8%. That means that out of 18.65 million shares in the tradable float, 10.42 million shares are sold short by the bear.

I would wait until after INSYS Therapeutics reports, and then look for long-biased trades if this stock manages to break out above a key downtrend line that will start over $11.84 to its 200-day at $12.02 with volume that hits near or above 889,345 shares. If that breakout develops post-earnings, then this stock will set up to re-test or possibly take out its next major resistance levels at $13.30 to $13.70, or even $15 a share.

Valeant Pharmaceuticals

My final earnings short-squeeze play is healthcare player Valeant Pharmaceuticals (VRX) , which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect Valeant Pharmaceuticals to report revenue of $2.16 billion on earnings of 96 cents per share.

The current short interest as a percentage of the float for Valeant Pharmaceuticals is very high at 15.9%. That means that out of the 308.07 million shares in the tradable float, 49.26 million shares are sold short by the bears.

I would wait until after Valeant Pharmaceuticals reports, and then look for long-biased trades if this stock manages to break out above a key downtrend line that triggers over $10.58 to its 50-day at $10.67 with volume that hits near or above 19.41 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 resistance levels at $11.43 to $11.60, or even $12.55 to $13 a share.

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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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