CrowdStrike (CRWD) reports earnings tomorrow, and rising stock prices paired with declining short interest historically signal bearish post-earnings returns. While the stock has climbed since the last earnings report and nears consensus price targets, prior patterns of reversal after bullish runs suggest caution heading into tomorrow’s announcement.

Historically, the stock tends to reverse the return from the week before earnings.

When short interest rises in the week leading up to earnings, the stock has typically rallied, suggesting short positions act as a contrary indicator.

This time, the stock is up, which, in historical context, is a bearish signal.

Similarly, short interest is down, which also acts as a contrary indicator, adding to the bearish outlook.

The chart shows a pattern where rising stock prices and falling short interest have historically been correlated with negative returns.

The stock typically moves around 8% on earnings, and options market expectations align with this, anticipating an 8% move.

The chart indicates the stock is higher, with lower short interest.

It also shows that the stock reversed direction following the last two earnings reports, with short interest rising ahead of the earnings gains.

The stock is near its recent highs and has been climbing since the last earnings report.

The stock price is currently near the analyst consensus price target.

The short position is in the middle of its historical range, but below its high.

Some analysts are expecting positive earnings but caution that the stock may not rise much further, as the positive outlook may already be priced in.

CRWD has rallied heading into earnings, but historical patterns of reversals after rising prices and declining short interest suggest caution. With the stock near consensus price targets, the risk of post-earnings downside may outweigh the upside potential.

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