5 Stocks Set to Soar off Bullish Earnings
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.
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 the stock is acting technically very bullish and you have a very 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 earnings this week.
My first earnings short-squeeze idea is metal mining player Alcoa(AA) , which is set to release its numbers on Tuesday after the market close. This company engages in the production and management of primary aluminum, fabricated aluminum and alumina. Wall Street analysts, on average, expect Alcoa to report revenue of $5.77 billion on a loss of 4 cents per share.
During the past three quarters, Alcoa's quarterly results have fallen short of Wall Street estimates. Last quarter, the company reported a loss of 3 cents per share vs. estimates for profit of one cent per share. Alcoa is hoping to report a profit this quarter, which would rebound from a loss last quarter that snapped a streak of profits. The company reported a profit of $380 million in the first quarter of the last fiscal year, $322 million in the second quarter and $172 million in the third quarter before dropping to a loss in the fourth quarter.