Dell Technologies (DELL) reports earnings tomorrow, with both the stock price and short interest rising this week. Historical data suggests negative returns following earnings when both metrics increase. With recent earnings moves exceeding expectations, and short sellers historically accurate, caution is advised despite strong recent performance and approaching analyst price targets.

Dell reports earnings tomorrow.

The return the week after earnings is negatively correlated with the return the week before. This indicates that the stock tends to revert most of the time after earnings.

The return the week after earnings is also negatively correlated with changes in short interest. This suggests that short sellers are usually correct around earnings announcements.

With both the stock price and short interest rising this week, historical patterns suggest that the return following earnings is more likely to be negative.

DELL has been approaching the average analyst price target and is up 17% this month. Over the past 5 years, DELL stock has increased several times, despite earnings showing a decline.

The stock typically moves 8% on earnings, and the options market is pricing in a 9% move. However, recent earnings announcements have led to larger moves: 17%, 21%, and 31%.

The graph shows DELL and short interest rising recently, with DELL selling off last earnings after short interest increased.

Dell’s price and short interest are both up heading into earnings, a historically bearish signal. With large post-earnings moves in recent quarters and short sellers often correct, caution is warranted as the stock approaches key price targets.

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