Stock Quotes in this Article: HELE, MAR, OCZ, VOXX, WWW

WINDERMERE, Fla. (Stockpickr) -- Short-sellers hate being caught short a stock that reports a blowout quarter. When this happens, we often see a tradable short-squeeze develop as the bears rush to cover their positions to avoid big losses. Even the best short-sellers know that it’s never a great idea to stay short once a bullish earnings report sparks a big short-covering rally.

This is why I scan the market for heavily shorted stocks that are about to report earnings. You only need to find a few of these stocks in a year to help enhance your portfolio returns -- the gains become so outsized in such a short timeframe that your profits add up quickly.

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That said, let’s not forget that stocks are heavily shorted for a reason, so you have to use trading discipline and sound money management when playing earnings short-squeeze candidates. It’s important that you don’t go betting the farm on these plays and that you manage your risk accordingly. Sometimes the best play is to wait for the stock to break out following the report before you jump in to profit off a short squeeze. This way, you’re letting the trend emerge after the market has digested all of the news.

Of course, sometimes the stock is going to be in such high demand that you risk missing a lot of the move. That’s why it can be worth betting prior to the report -- but only if you have a very strong conviction that the stock is going to rip higher, and its acting technically very bullish. Remember, even when you have that conviction and you have done your due diligence, the stock can still get hammered if the street doesn’t like the numbers or guidance.

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If you do decide to bet ahead of a quarter, then you might want to use options to limit your capital exposure. Heavily-shorted stocks are usually the names that make the biggest post-earnings moves and have the most volatility. I personally prefer to wait until all the earnings-related news is out, and then jump in and trade the prevailing trend on a heavily shorted stock that’s reporting its numbers.
With that in mind, here’s a look at several stocks that could experience big short squeezes when they report earnings this week.

OCZ Technology Group

My first earnings short-squeeze play today is computer storage devices player OCZ Technology Group (OCZ), which is set to report results on Tuesday after the market close This company engages in the design, manufacture, and distribution of solid state drives and computer components primarily in the U.S., Canada, the Middle East, Africa, Germany and other European countries. Wall Street analysts, on average, expect OCZ Technology Group to report revenue of $115.72 million on a loss of 12 cents per share.

Last week, Piper Jaffray said that after a talk with industry contacts and OCZ Technology leadership, they think OCZ is facing growing demand for its solid state drives. Additionally, Piper believes that OCZ is part of a number of deals at Microsoft (MSFT) thatt it plans to expand on in the upcoming earnings call. Piper has an overweight rating on the stock and a $17 price target.

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The current short interest as a percentage of the float for OCZ Technology Group is extremely high at 37.8%. That means that out of the 64.47 million shares in the tradable float, 24.35 million shares are sold short by the bears. This is a massive short interest, so if the company can manage to beat Wall Street estimates and raise its guidance, then we could easily see an explosive more post-earnings.

From a technical perspective, OCZ is currently trading above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been downtrending strong since February, with shares dropping from around $10 to a low of $4.14 a share in June. During that move lower, shares of OCZ have consistently made lower highs and lower lows, which was bearish technical price action. After hitting that low of $4.14, shares of OCZ have started to reverse that downtrend with the stock now making higher lows and setting up for higher highs.

If you’re in the bull camp on OCZ, then I would wait until after it reports earnings and look for long-biased trades if this stock can manage to trigger a break out above some near-term overhead resistance at $6.47, and above its 200-day moving average of $6.77 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 2.2 million shares. If we get that move, then OCZ could easily spike back toward $8 to $9 a share or possibly even higher.

I would simply avoid OCZ or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops below its 50-day moving average of 5.27 a share with high volume. If we get that move, then OCZ could take out some more support at $4.81 and possible move back below its 52-week low of $4.14 a share.

Voxx International

Another potential earnings short-squeeze trade is technology player Voxx International (VOXX), which is set to release its numbers on Tuesday after the market close. This company is an international distributor in the accessory, mobile and consumer electronics industries. Wall Street analysts, on average, expect Voxx International to report revenue of $207.83 million on earnings of 10 cents per share.

This company has met or topped Wall Street estimates in the last three straight quarters. During the last quarter, Voxx International reported earnings per share of 46 cents, which beat Wall Street estimates of 16 cents per share.

The current short interest as a percentage of the float for Voxx International is rather high at 10.3%. That means that out of the 18.92 million shares in the tradable float, 1.92 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 15.8%, or by about 262,000 shares. If the bears are pressing too hard into this quarter, then we could easily see a big short-squeeze develop post-earnings.

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From a technical perspective, VOXX is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been hammered during the last two months, with shares dropping from a high of $14.08 to a recent low of $8.46 a share. During that move lower, shares of VOXX have been making lower highs and lower lows, which is bearish technical action. That said, the stock has started to rebound off that $8.46 low during the last few weeks, and it’s now trading within range of a near-term breakout trade.

If you’re bullish on VOXX, then I would wait until after it reports numbers and look for long-biased trades if this stock can manage to move above some near-term overhead resistance at $10.15, and then its 200-day moving average of $10.60 a share with high-volume. Look for volume on that move that hits near or above its three-month average action of 206,708 shares. If we get that move, then VOXX could hit $13 to $14 a share or higher post-earnings.

I would simply avoid VOXX or look for short-biased trades if after earnings this stock fails to trigger that breakout, and then takes out some near-term support at $8.90 to $8.46 a share with high-volume. If we get that move, then VOXX could easily trend back toward $7 to $6.50 a share if the bears decide to hammer this down post-earnings.

Helen of Troy

A potential earnings short-squeeze trade in the appliance and tool complex is Helen of Troy (HELE), which is set to release numbers on Thursday before the market open. This is a global designer, developer, importer and distributor of an expanding portfolio of brand-name consumer products. Wall Street analysts, on average, expect Helen of Troy to report revenue of $299.05 million on earnings of 86 cents per share.

This company is looking extend its streak of beating Wall Street estimates this quarter to three straight earnings beats in a row. Last quarter, it beat Wall Street estimates after it reported net income of 92 cents per share, and in the previous quarter, it registered a profit of $1.04 a share. Helen of Troy is looking to register its fifth quarter in a row of double-digit revenue growth. The company has averaged year-over-year revenue growth of 54.4% over the last four quarters.

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The current short interest as a percentage of the float for Helen of Troy is notable at 3.5%. That means that out of the 29.98 million shares in the tradable float, 1.06 million shares are sold short by the bears. This isn’t a huge short interest, but it’s more than enough to spark a short-covering rally if Helen of Troy can beat estimates and raise its forward guidance.

From a technical perspective, HELE is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock dropped from its May high of $35.35 a share to a recent low of $29.77 a share. After hitting that low, shares of HELE rallied right back to its recent high of $34.73 a share. That move has pushed HELE within range of triggering a breakout trade post-earnings.

If you’re bullish on HELE, then I would wait until after its report and look for long-biased trades if this stock can manage to trigger a break out above some overhead resistance at $34.73 to $35.35 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 138,040 shares. If we get that action, then HELE could easily take out its 2011 high of $36.75 a share, and then continue to trend north toward $40 a share or higher.

I would avoid HELE or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops below its 50-day moving average of $32.75 a share with high volume. If we get that move, then look for HELE to re-test and possibly take out its 200-day moving average of $31.28 a share post-earnings.

Marriott International

One potential earnings short-squeeze trade in the hotels and motels complex is Marriott International (MAR), which is set to release numbers on Wednesday after the market close. This company operates, franchises, and licenses hotels and corporate housing properties worldwide. Wall Street analysts, on average, expect Marriott International to report revenue of $2.84 billion on earnings of 42 cents per share.

During the first quarter, Marriott International broke its streak of three straight quarters of revenue growth, after the company reported a year-over-year decline in revenue. Revenue dropped 8.1% in the first quarter after rising 1.4% in the fourth quarter of the last fiscal year, 8.5% in the third quarter of the last fiscal year and 7.3% in the second quarter of the last fiscal year.

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The current short interest as a percentage of the float for Marriott International is worth mentioning at 8%. That means that out of the 256.04 million shares in the tradable float, 20.47 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 6.1%, or by about 1.18 million shares. If the bears are caught pressing their bets too hard into this quarter, then we could easily see a decent short-squeeze post-earnings.

From a technical perspective, MAR is currently trading above both its 50-day and 200-day moving averages, which is bullish. During the last two months, shares of MAR have been trending sideways between $35.68 and $40.45 a share. A high-volume move outside of that range post-earnings should setup the next major trend for shares of MAR.

If you’re in the bull camp on MAR, then I would look for long-biased trades if after earnings this stock triggers a near-term breakout above some overhead resistance at $39.87 to $40.45 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 3,179,980 shares. If we get that action, then MAR will enter new 52-week high territory and the stock could hit $45 a share or higher if the bulls gain complete control of the stock.

I would simply avoid MAR or look for short-biased trades after earnings the stock fails to trigger that breakout, and then moves back below its 50-day moving average of $38.45 a share with high-volume. If we get that action, then MAR could trend down towards $37 to $35.68 a share, or even lower if the bears pound this stock down post-earnings.

Wolverine World Wide

My final earnings short-squeeze trade idea today is footwear player Wolverine World Wide (WWW), which is set to release numbers on Tuesday before the market open. This company is a designer, manufacturer and marketer of a range of casual footwear and apparel, performance outdoor footwear and apparel, industrial work shoes, boots and apparel, and uniform shoes and boots. Wall Street analysts, on average, expect Wolverine World Wide to report revenue of $314.46 million on earnings of 44 cents per share.

This company has met or topped Wall Street estimates during the last four quarters. During the last quarter, it reported earnings per share of 64 cents, which beat Wall Street estimates of 55 cents per share.

The current short interest as a percentage of the float for Wolverine World Wide is pretty high at 7.1%. That means that out of the 47.16 million shares in the tradable float, 3.35 million are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 19.1%, or by about 536,000 shares. If the bears are caught pressing too hard into this quarter, then we could easily see a sizeable short-squeeze develop post-earnings.

From a technical perspective, WWW is currently trading above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock was hit hard during the last two months, with shares dropping from $43.99 to $36.85 a share. During that move lower, shares of WWW were making lower highs and lower lows, which is bearish technical price action. That said, after hitting $36.85 a share, the stock has started to trend sideways between $36.85 and $39.32 a share. A move outside of that sideways pattern should setup the next major trend for WWW.

If you’re bullish on WWW, then I would wait until after its report and look for long-biased trades if it can manage to trigger a break out above some near-term overhead resistance at $39.32, and then above its 50-day moving average of $40.35 a share with high-volume. Look for volume on that move that registers near or above its three-month average action of 994,077 shares. If we get that action, then WWW has a great chance of re-testing and possibly taking out its recent resistance zone near $42.60 to $43.99 a share.

I would simply avoid WWW or look for short-biased trades if it fails to trigger that breakout, and then moves back below some major near-term support at $36.85 a share with high-volume. If we get that move, then WWW could drop pretty sharply towards its next significant support levels at $35 to $33.89 a share, or possibly even lower if the bears whack this stock post-earnings.

To see more potential earnings short squeeze plays, check out the Earnings Short Squeeze Plays portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.

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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.