VeriFone and 4 More Could Squeeze Short-Sellers When They Report

It's time to take a look at five stocks that could experience big short squeezes following any bullish earnings reports they soon release.

Remember, short sellers despise being caught short a stock that releases a solid earnings report. When this happens, we often see a tradable short squeeze develop as the bears rush to cover some of their positions.

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

With that in mind, here are five:

VeriFone Systems

My first earnings short-squeeze trading opportunity is business equipment player VeriFone Systems (PAY) , which is set to release numbers Thursday after the market close. Wall Street analysts, on average, expect VeriFone Systems to report revenue of $472.48 million on earnings of 30 cents per share.

The current short interest as a percentage of the float for VeriFone Systems is pretty high, at 11.9%. That means that out of the 110.95 million shares in the tradable float, 13.29 million shares are sold short by the bears.

I would wait until after VeriFone Systems reports, and then look for long-biased trades if this stock manages to break out above some key resistance levels at $18.99 to $19.50 with volume that hits near or above 1.54 million shares. If that breakout triggers post-earnings, this stock will set up to make a run at $21 to $23, or even $25 a share.

HealthEquity

Another potential earnings short-squeeze play is health care information services provider HealthEquity (HQY) , which is set to release numbers Tuesday after the market close. Wall Street analysts, on average, expect HealthEquity to report revenue of $54.77 million on earnings of 16 cents per share.

The current short interest as a percentage of the float for HealthEquity sits at 6.5%. That means that out of the 48.83 million shares in the tradable float, 3.18 million shares are sold short by the bears.

I would wait until after HealthEquity reports, and then look for long-biased trades if this stock manages to break out above its all-time high of $49.69 with volume that hits near or above 487,034 shares. If that breakout fires off post-earnings, then this stock will set up to make a run at $55 to $60, or even $65 a share.

Ambarella

One potential earnings short-squeeze candidate is semiconductor player Ambarella (AMBA) , which is set to release numbers Tuesday after the market close. Wall Street analysts, on average, expect Ambarella to report revenue of $63.48 million on earnings of 36 cents per share.

The current short interest as a percentage of the float for Ambarella is pretty high at 12.1%. That means that out of the 32.09 million shares in the tradable float, 3.88 million shares are sold short by the bears.

I would wait until after Ambarella reports, and then look for long-biased trades if this stock manages to break out above its 20-day at $61.15 to $62 with volume that hits near or above 803,140 shares. If that breakout hits post-earnings, this stock will set up to make a run at $65 to $70 a share.

Oxford Industries

Another earnings short-squeeze prospect is apparel player Oxford Industries (OXM) , which is set to release numbers Tuesday after the market close. Wall Street analysts, on average, expect Oxford Industries to report revenue of $273.40 million on earnings of $1.04 per share.

The current short interest as a percentage of the float for Oxford Industries is notable at 7.9%. That means that out of the 14.95 million shares in the tradable float, 1.19 million shares are sold short by the bear.

I would wait until after Oxford Industries reports, then look for long-biased trades if this stock manages to break out above its 200-day at $60.21 to $60.40 with volume that hits near or above 187,567 shares. If that breakout triggers post-earnings, this stock will set up to make a run at $65 to $70, or even $72 a share.

Duluth Holdings

My final earnings short-squeeze trade idea is lifestyle apparel player Duluth Holdings (DLTH) , which is set to release numbers Tuesday after the market close. Wall Street analysts, on average, expect Duluth Holdings to report revenue of $82.94 million on earnings of 6 cents per share.

The current short interest as a percentage of the float for Duluth Holdings is extremely high at 33.9%. That means that out of the 9.50 million shares in the tradable float, 3.22 million shares are sold short by the bears.

I would wait until after Duluth Holdings reports, and then look for long-biased trades if this stock manages to break out above some near-term resistance levels at $21.78 to $22.89 with volume that hits near or above 302,831 shares. If that breakout materializes post-earnings, this stock will set up to make a run at $23.50 to its 200-day at $25, or even $27 to $28 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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