DuPont de Nemours, Inc. (DD) reports earnings tomorrow amid a bearish setup where the stock is down while short interest has risen. Historically, such conditions have led to a reversal and an eventual rally, with our model signaling a favorable post-earnings move.

DD reports tomorrow morning.

DuPont exhibits two notable patterns before and after earnings.

The stock shows a strong reversal pattern: the day after earnings typically moves in the opposite direction of the prior week's trend, often exceeding the week's overall movement.

With the stock down this week, the outlook is bullish.

Additionally, the stock tends to rise when short positions increase.

Short interest is up 9%. While sentiment is bearish, history suggests shorts are often wrong.

DuPont typically moves 3.7%, which is already priced in. The model predicts a 5% move, factoring in both positive and negative outcomes. The risk/reward ratio is favorable compared to most earnings stocks.

The stock and short interest are closely correlated the week before earnings, as investors tend to follow reversal patterns.

With the stock down and short interest up, both indicators historically align with positive post-earnings returns.

DuPont has a small short interest of only 1.08%, but 10% of analysts have sell ratings, indicating more bearishness from analysts than investors.

DD has consistently beaten earnings estimates and has seen stock price increases in four consecutive quarters after earnings.

DuPont’s historical reversal patterns indicate that rising short interest, despite current bearish sentiment, often precedes a rally. With the stock trading at depressed levels before earnings and a model forecast of an upward move, investors should note the potential for a significant rebound.

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