Wireless concern Iridium Communications (IRDM) is scheduled to report third-quarter earnings on Tuesday, Oct. 29. Prior to the event, IRDM shares recently flashed a buy signal has never failed.
Since peaking north of $28 in mid-April, IRDM shares have bounced along support in the $20-$21 region, with rally attempts rejected in the $27 area. However, IRDM is back within one standard deviation of its 10-month moving average, after trading north of it at least 80% of the time over the past 20 months. This has been a very positive technical signal for the equity in the past.
Specifically, there have been seven similar pullbacks to the 10-month moving average over the past three years, after which IRDM was higher three months later 100% of the time, per data from Schaeffer’s Senior Quantitative Analyst Rocky White. In fact, the equity has averaged a three-month return of 24.22% after these previous signals. From the stock’s current perch at $23.84, another 24.22% surge would put the satellite communications concern around $29.61 — in record-high territory — in early 2020.
What’s more, a short squeeze could be the fuel needed to feed the fire. Despite short interest declining by 10.4% in the past two reporting periods, these bearish bets still account for a healthy 7.5% of the stock’s total available float. At IRDM’s average pace of trading, it would take two weeks for these pessimistic positions to be repurchased.
It’s also worth noting that IRDM moved higher the day after the company’s earnings in three of the last four quarters, including a one-day gain of 8.3% after earnings in July. This time last year, the stock surged 9.8% the session after earnings.