$UBNT High Short Interest Earnings Drift Swing Trade – Ubiquiti Networks

Ubiquiti Networks $UBNT reported earnings on May 5th beating analysts estimates on both the top and bottom line. The stock appears to be consolidating again after the initial earnings report gap-up and looks like an interesting swing trade candidate. This stock has a very small 25 million share float of which 36% is sold short. Below is the short interest data via shortsqueeze.com:

UBNT SHort

I first flagged $UBNT as a potential swing trade idea over on StockTwits ahead of the earnings report:

UBNT

Below is the current chart of $UBNT; note the similar set-up between these two charts.

UBNT 2

There are several things to like about the current chart; a rising 20, 50, and 200 day moving average, a golden cross after the earnings beat, and consolidation at the rising 20 day moving average.

The combination of a small float, a high short interest, and a strong quarterly report can lead to short covering. When traders cover short positions it can lead to explosive short-term moves in a stock’s share price, which is just what we are looking for in a swing trade.

I will look to get long $UBNT if it can break out of the symmetrical triangle to the upside around $38.25. In the event that my analysis is wrong, I will set my stop as outlined in my risk management plan.

Disclosure: The author holds no position in $UBNT but may take a long position in the next 24-48 hours. 

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