PRA Group – Set-Up for Volatility Squeeze Before Earnings

By | April 29, 2015

PRA Group (PRAA) manages a portfolio of defaulted accounts receivable, and the company reports earnings after the close today. The stock spent the first three months of the year basing below a downtrend line drawn off the period highs. In April, it broke above the trend line and immediately began trading in a narrow horizontal consolidation. The readings on the Average True Range and Bollinger Bandwidth indicators reflect the tightness of the contraction and suggest the potential for a volatile move. Price momentum indicators are flat as would be expected with this level of range contraction, but Chaikin Money Flow has been reflecting modest accumulation. There is a 25% short interest in the stock, and if it were to break to the upside after a positive earnings report, there could be a strong covering rally.

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