3 stocks ready to break out on earnings

Published Tue, Apr 21 201512:12 PM EDTUpdated Wed, Apr 22 20158:16 AM EDT

With the heaviest week of the earnings season upon us, a technical analyst shares his strategy for finding stocks whose charts are signaling higher-than-expected results are likely in the cards. These candidates are getting harder to find as analysts' S & P 500 earnings estimates for the first quarter call for a 2 percent decline, according to Thomson Reuters, marking the first drop since 2009. But while estimates paint a bleak outlook for the market, Dan Fitzpatrick, founder of StockMarketMentor.com , identified three stocks that could be poised to beat expectations and soar, based on his chart analysis. Fitzpatrick believes that chart patterns and other data such as short interest can be more predictive than analysts, who just follow the herd. The money play: CNBC Pro screened for the companies with the highest short interest that are set to report earnings this week. We then left it to Fitzpatrick to determine which of those names could be ready for a pop. Read More Goldman: Want to make 18% the easy way? Short interest is important because it depicts the number of investors betting on a price decline. When that negative trade gets too crowded, even mildly positive earnings can send shorts running for the exits, causing what is referred to as a "short squeeze." Cabela's: Shares of the sporting goods retailer are up more than 15 percent since hitting a 52-week low in October. Short interest for the stock stands at 17 percent of its float. Quarterly results will be released on Thursday. "CAB printed a major bottom in early November after a steep, high-volume selloff in late October. Since early November, the stock has been printing higher highs and lows and is now sitting right at the 50-day and 200-day moving averages. CAB is also rebounding off the rising support line shown above. So CAB is at a solid buy point right now. Any earnings number that isn't horrible will likely spark a short covering rally." Angie's List: Shares of the consumer review website are up 35 percent since hitting a 52-week low in February. Despite the recent gains, short interest for the stock remains elevated, with one quarter of its float sold short. Earnings results will be released on Wednesday. "With so many shares shorted, the potential for a short squeeze is high. While the stock is still in a downtrend with resistance along the 200-day moving average, last week we saw a higher low at around $5. If you look at the daily chart, you'll see that this recent higher low marks a turnaround for a stock that has been printing a series of lower lows since mid-2013. Earnings are due on Wednesday and this stock has a good chance of breaking this prevailing downtrend." Southwestern Energy: Shares of the oil and gas producer are up 25 percent since touching a 52-week low last month. Short interest stands at 13 percent, while quarterly results are expected to be released on Friday. Fitzpatrick is bullish on the name, but unlike the stocks above, believes you may get a better price after its earnings. "SWN is testing its resistance level, while still printing lower highs and lows. If you look at the 50-day moving average, you'll see that it's now flat—the first time this has occurred since the stock topped out in mid-2014. So the trend points to a multimonth base building process. The energy sector is where the money is flowing into, and SWN has been under accumulation. Still, I think it's risky to buy a stock that's up 25 percent in such a short period of time. I'm hoping for a pullback below $25. If the stock falls into the low $20's, I'd buy it."

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With the heaviest week of the earnings season upon us, a technical analyst shares his strategy for finding stocks whose charts are signaling higher-than-expected results are likely in the cards.

These candidates are getting harder to find as analysts' S&P 500 earnings estimates for the first quarter call for a 2 percent decline, according to Thomson Reuters, marking the first drop since 2009.

But while estimates paint a bleak outlook for the market, Dan Fitzpatrick, founder of StockMarketMentor.com, identified three stocks that could be poised to beat expectations and soar, based on his chart analysis.