Short-sellers despise being caught betting against a stock that releases an upbeat earnings report. When this happens, we often see a tradable short squeeze develop as the bears run to cover their positions. Even the best short-sellers know, it's never smart to get caught short into a bullish earnings report that sets off a squeeze.
This is why I scan the market every week for heavily shorted stocks that are set to report earnings. You only need to find a few of these plays every week to help supercharge your returns.
With that in mind, here's a look at five:
My first earnings short-squeeze trading opportunity is enterprise software player Oracle Corporation (ORCL) , which is set to release numbers Wednesday after the market close. Wall Street analysts, on average, expect Oracle Corporation to report revenue of $10.45 billion on earnings of 78 cents per share.
The current short interest as a percentage of the float for ORCL stands at 1.26%. That means that out of the 2.99 billion shares in the tradable float, 32.26 million shares are sold short by the bears.
I would wait until after ORCL reports, and then look for long-biased trades if this stock manages to break out above some key resistance levels at $46.07 to its 52-week high of $46.99 with volume that hits near or above 11.22 million shares. Some possible upside targets off that breakout are $55 to $60 a share.
Meanwhile, Jim Cramer talks about oversold retail stocks on Real Money. Get his insights or analysis with a free trial subscription to Real Money.