Stock Quotes in this Article: LNN, OXM, PVH, SNX, PCRX

WINDERMERE, Fla. (Stockpickr) -- Short-sellers hate being caught short a stock that produces bullish results. When this happens, we often see 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 kicks off 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 trade 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 the stock is acting technically bullish and you have a strong conviction that it is going to rip higher.

With that in mind, here’s a look at several stocks that could experience big short squeezes when they report quarterly earnings this week.

Oxford Industries

My first earnings short-squeeze trade idea today is apparel and accessories player Oxford Industries (OXM), which is set to report its numbers on Tuesday after the market close. This is an apparel design, sourcing and marketing company that features a portfolio of owned and licensed brands of clothing and golf apparel. Wall Street analysts, on average, expect Oxford Industries to report revenue of $192.30 million on earnings of 54 cents per share.

This company is looking to continue its bullish streak of earnings reports this week as it goes for its four consecutive quarter of topping Wall Street estimates. Oxford Industries’ profit has trended higher year over year by an average of more than fourfold over the past five quarters. The stock is around three points off its 52-week high of $52.64 ahead of its earnings report.

 

The current short interest as a percentage of the float for Oxford Industries is notable at 6.7%. That means that out of the 13.86 million shares in the tradable float, 932,000 shares are sold short by the bears. This is a decent short interest on a stock with a very low float. Any bullish earnings news could easily set this stock up to skyrocket as the shorts cover some of their bets.

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From a technical perspective, OXM is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock recently found some buying interest at around $46 to $46.40 a share, before trending higher back above its 50-day moving average of $49.62. This uptrend has now pushed OXM within range of a triggering a breakout trade post-earnings.

If you’re bullish on OXM, I would look for long-biased trades following its earnings report if the stock takes out some near-term overhead resistance at $50.90 a share with high-volume. Look for volume on that move that’s near or well above its three-month average action of 146,703 shares. If we get that action, then I would add to any long positions once OXM takes out some more overhead resistance at $52.64 a share. Target a run toward $55 or higher if the bulls push this stock up post-earnings.

I would avoid OXM or look for short-biased trades after earnings if the stock fails to breakout over $50.90 and then drops back below its 50-day moving average of $49.62 with high-volume. If we get that action, I would target a drop back towards that near-term support at $46 or possibly much lower if the bears hammer this stock down post-earnings.

Lindsay

One earnings short-squeeze candidate in the construction and agriculture machinery complex is Lindsay (LNN), which is set to report results on Wednesday before the market open. This company is a provider of range of water management and road infrastructure products and services. Wall Street analysts, on average, expect Lindsay to report revenue of $129.90 million on earnings of 83 cents per share.

This company has jumped back and forth between beating Wall Street estimates during the past fiscal year. Lindsay’s profit has trended higher year over year by an average of 50.3% over the past five quarters. This stock is trading well off its 52-week high of $85.87 as we approach its earnings report.

The current short interest as a percentage of the float for Lindsay is rather high at 11.3%. That means that out of the 12.43 million shares in the tradable float, 1.40 million are sold short by the bears. This is a high short interest on a stock with a very low tradable float. If Lindsay can report a solid quarter and bullish forward guidance, then this stock could soar post-earnings due to its low float and 11.3% short interest.

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From a technical perspective, LNN is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock gapped up strong on Monday breaking out above some near-term overhead resistance at $67.27 a share with heavy volume. Volume registered 317,000 shares versus its three-month average daily action of 128,913 shares. That move now puts LNN within range of triggering another big breakout post-earnings.

If you’re bullish on LNN, I would look for long-biased trades after earnings if this stock continues to trend above that recent breakout price of $67.27 with strong volume flows. Look for upside volume that registers near or well above its three-month average action of 128,913 shares. If we get that action, then I would add to any long positions if LNN breaks out above some past overheard resistance at $72.70 a share with volume. Target a run toward $75 or higher if the bulls gain full control of this stock post-earnings.

I would simply avoid LNN or look for short biased trades if after earnings this stock fails to hold above that breakout level of $67.27 and Monday’s low of $66.63 a share. If you see a heavy volume move back below those levels, then look for LNN to re-test its 50-day moving average of $62.74 a share, or possibly its 200-day moving average of $59.38 post-earnings.

Phillps-Van Heusen

Another earnings short-squeeze idea in the apparel and accessories sector is Phillips-Van Heusen (PVH), which is set to report results on Tuesday after the market close. This company designs and markets branded dress shirts, neckwear, sportswear, footwear, and other related products worldwide. Wall Street analysts, on average, expect PVH to report revenue of $1.50 billion on earnings of $1.09 per share.

On Monday, Brean Murray raised its price target on Phillips-Van Heusen to $105 from $85 ahead off its fourth-quarter earnings report. The firm said the company’s dominant worldwide brands as well as domestic positions will continue to drive market share gains and higher multiples. That bump for Murray pushed shares of Phillips-Van Heusen to a new 52-week high of $92.13 on above average volume.

The current short interest as a percentage of the float for PVH sits at 3.3%. That means that out of the 64.88 million shares in the tradable float, 2.15 million are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 2.2%, or by about 45,000 shares. This isn’t a huge short interest, but it’s more than enough to spark some short-covering if PVH reports a strong quarter and issues bullish guidance.

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From a technical perspective, PVH is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending very strong for the past six months, rising from its October low of $53.51 to its current price of around $91 a share. During that uptrend, the stock has consistently made higher lows and higher highs, which is bullish price action.

If you’re bullish on PVH, I would look for long-biased trades after its earnings report if the stock takes out its 52-week high or its daily high on Tuesday (whichever is greater) with high volume. Look for upside volume that’s near or well above its three-month average action of 742,270 shares. If we get that action, then look for PVH to make a run at $100 or higher post-earnings.

I would simply avoid PVH or look for short biased trades if after earnings this stock fails to make a new 52-week high and then drops below some near-term support at $87.50 with high volume. If we get that action, I would look for PVH to drop down towards its 50-day moving average of $82.34 a share or possibly into the high-$70s if the bears pressure this lower post-earnings.
Synnex

A potential earnings short-squeeze play in the basic materials complex is Synnex (SNX), which is set to release numbers on Tuesday after the market close. This is a business process services company, servicing resellers, retailers and original equipment manufacturers, in multiple regions globally. Wall Street analysts, on average, expect Synnex to report revenue of $2.54 billion on earnings of 91 cents per share.

This company has been on a tear as we head closer its latest earnings report, since Synnex is going for its fifth consecutive quarter of topping Wall Street estimates. Synnex's profits have been trending higher year over year by an average of 18% over the past five quarters. This strong earnings trend has helped to push the stock into 52-week-high territory on Monday at $43.99 a share.

The current short interest as a percentage of the float for Synnex is rather high at 11.1%. That means that out of the 26.19 million shares in the tradable float, 2.91 million are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 10.9%, or by about 285,000 shares. This is another stock with a very low float and high short interest. This is the perfect recipe for a monster short squeeze if Synnex can report a strong quarter and bullish forward guidance.

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From a technical perspective, SNX is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock triggered a breakout trade on Monday after it moved above some near-term overhead resistance at $42.10 with lighter than average volume. That move has also pushed SNX into new 52-week-high and all-time-high territory, which is bullish price action.

If you’re bullish on SNX, I would look for long-biased trades after its earnings call if the stock manages to make a new 52-week high and all-time high with heavy volume. Look for volume on that move that’s tracking in close to or above its three-month average action of 345,566 shares. If we get that action, I would look for SNX to tag $50 a share or higher in the near future if the bulls spark a short-covering rally.

I would simply avoid this stock or look for short-biased trades in SNX after earnings if it fails to make a new high and then drops below some near-term support at $42 to 40 a share with high-volume. Target a drop back towards its 50-day moving average of $39.39 a share or possibly down to $36 if the bears hammer this lower post-earnings.

Pacira Pharmaceuticals

My final earnings short-squeeze candidate is biotechnology and drugs player Pacira Pharmaceuticals (PCRX), which just released numbers on Tuesday morning. This is a pharmaceutical company engaged in the development, commercialization, and manufacture of pharmaceutical products for hospitals and ambulatory surgery centers.

Pacira Pharma missed Wall Street estimates for the fourth quarter after reporting a loss of 72 cents vs. the consensus for a loss of 54 cents. Revenue was slightly better than Wall Street estimates at $4.23 million vs. the consensus of $4.05 million. The company also said that it expects to initiate the commercial launch of Exparel in the U.S. during the week of April 9. Exparel was approved by the FDA in October 2011.

The current short interest as a percentage of the float for Pacira Pharmaceuticals is pretty high at 12.6%. That means that out of the 12.08 million shares in the tradable float, 1.83 million are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 2.7%, or by about 48,000 shares.

From a technical perspective, PCRX is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has found some decent buying interest over the last two months at around $10 a share. The stock has also been making higher highs and higher lows over those two months, which is bullish price action. Now PCRX is trading within range of a big breakout trade post-earnings.

If you’re bullish on PCRX, I would look for long-biased trades after its report if it can manage to break out above $12.01 to $12.10 a share with high-volume. Look for volume that registers close to or above its three-month average volume of 126,650 shares. If we get that action, I would then add to any long positions once PCRX takes out $13 a share with volume. A move over $13 will give PCRX a great chance to re-test its all-time high of $15.34 in the near future.

I would simply avoid PCRX or look for short-biased trades after its report if the stock fails to break out and then drops below $10, and its 200-day moving average of $9.68 a share with high-volume. Target a drop back towards $8.50 a share or lower if the bears hammer this down post-earnings.

To see more potential earnings short squeeze plays, including Sealy (ZZ), Family Dollar Stores (FDO) and Charming Shoppes (CHRS), 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.