The Fairway Group Long Swing Trade Thesis - Earnings Play/Short Cover

The Fairway Group (FWM) is set to report earnings after the bell on May 26th, 2015. Immediately before the last earnings report, the stock made a nice run up and continued to run to over $7, before being re shorted down to its current level of about $4.90. The last earnings were reported on Feb. 5th, 2015, after the bell. Let's take a look at the price action.

Feb 5, 2015

5.10

5.37

4.90

5.06

710,700

5.06

Feb 4, 2015

4.90

5.25

4.79

5.02

510,900

5.02

Feb 3, 2015

5.10

5.35

4.76

4.91

937,500

4.91

Feb 2, 2015

4.59

5.16

4.46

5.09

902,800

5.09

Jan 30, 2015

4.34

4.86

4.31

4.56

764,800

4.56

Jan 29, 2015

4.28

4.40

4.11

4.35

338,800

4.35

Jan 28, 2015

4.40

4.44

4.18

4.24

297,600

4.24

Jan 27, 2015

4.21

4.42

4.20

4.36

342,500

4.36

Jan 26, 2015

4.36

4.45

4.17

4.27

399,800

4.27

We can see from above, the stock made a nice run from its low of $4.11 on January 29th, up to $5.37 which was the day of the earnings after the bell.

Now, the short interest is just as high, if not higher coming in at 17.5%. With Fairway's new management making progress with the bottom line, I would expect many shorts to cover as to minimize their risk of a stronger bottom line and a short squeeze where they can lose out on the strong profit they already have (52 week high recently of over $7).

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Disclosure: Long FWM.

Disclaimer: This article/video is intended for informational and entertainment use only, and should not be construed as professional investment advice. They are my opinions only. Trading stocks is risky -- always be sure to know and understand your risk tolerance. You can incur substantial financial losses in any trade or investment. Always do your own due diligence before buying and selling any stock, and/or consult with a licensed financial adviser.

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