Ahead of Earnings: MannKind Corp., MasterCard Inc., and Sirius XM Radio Inc.

              

Earnings season continues to grow more crowded next week, as the pace of corporate reports gains momentum. After sifting through the massive list of companies scheduled to enter the earnings confessional, MannKind Corp. (MNKD), MasterCard Inc. (MA), and Sirius XM Radio Inc. (SIRI) emerged as potential trading ideas for investors willing to take a few chances during this period of increased volatility on Wall Street.

Biopharmaceutical concern MannKind Corp. (MNKD) is scheduled to step into the earnings limelight ahead of the open on Monday, Aug. 2. Currently, Wall Street is expecting MNKD to post a loss of 40 cents per share, an improvement over the company's loss of 54 cents per share in the same quarter last year. Historically, the company has topped the consensus estimate in three of the prior four reporting periods, though MNKD's fourth-quarter 2009 miss has pulled its average surprise to -0.58%.

Technically speaking, MNKD bulls could certainly use something to cheer about. The stock is currently sitting on a year-to-date loss of roughly 21%. The shares have recently rebounded from support near $5 per share, but resistance looms large overhead in the $7.00-$7.20 area. MNKD has closed only one session above this level since March 2010.

Expectations are leaning heavily toward the bearish end of the spectrum heading into MNKD's quarterly report. For instance, more than 25% of the stock's float is sold short, while five of the nine analysts following the shares rate them a "strong sell." Even options traders are jumping on the bearish bandwagon, as the stock's 10-day International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) put/call volume ratio of 0.79 arrives just seven percentage points shy of an annual peak.

The takeaway for MNKD investors is that the stock stands a very good chance of rallying in the wake of the company's quarterly report, due to extremely low investor expectations. If the company can at least match the consensus estimate and not issue any warnings about future quarters, MNKD should continue its current uptrend. What's more, if the stock receives enough of a boost to overtake the $7.20 region, we could see the shares pop sharply higher as short sellers and other bearish investors rush for the exits on their losing positions.

Ahead of the open on Tuesday, Aug. 3, credit card guru MasterCard Inc. (MA) is expected to report second-quarter earnings of $3.33 per share - a marked improvement over the company's profit of $2.67 in the same quarter a year ago. Looking back over the prior four quarters, we find that MA has topped the Street's expectations three times, missing in the fourth quarter of 2009 by 4 cents per share. Overall, the company has bested the consensus estimate by an average of 9.4% during this time frame.

Unlike MNKD, investors have high hopes for MA's quarterly report. In the options pits, speculative traders have loaded up on calls, with the stock's SOIR of 0.82 arriving below 95% of those taken during the past year. Analysts are also extremely bullish, as Zacks reports that 29 of the 31 brokerage firms following MA rate the stock a "buy" or better, with only one "sell" rating to speak of.

Short sellers are really the only bearish contingent left on MA, but even they are beginning to have second thoughts. For instance, the number of MA shares sold short plunged by more than 16% during the past month. Some 7.4% of the stock's float remains sold short, meaning that MA could benefit from additional short covering in the event that the company is able to impress investors with its second-quarter earnings report.

Technically speaking, MA has its work cut out for it. The shares have declined more than 18% since the start of 2010, raising some contrarian concerns given the wealth of bullish sentiment levied against this underperformer. However, MA has recently rebounded off support in the psychologically important $200 region. This area is also home to the stock's 160-week moving average. Furthermore, MA has pushed past former resistance at its 10-week trendline. The stock now faces a showdown with short-term resistance in the $215-$220 area.

With investor expectations seemingly set higher than the consensus Wall Street view, MA shares could have difficulty moving higher even if the company meets analysts' targets. As such, even a moderately positive report may not be enough to send MA past overhead resistance. However, with so many bullish investors paying attention to the shares, a negative report could threaten support in the $200 region. Bulls should approach MA with caution.

You may well be earnings fatigued heading into the middle of the week, but you may want to stay plugged in for Sirius XM Radio's (SIRI) quarterly report ahead of the open on Wednesday, Aug. 4. The company is expected to report breakeven second-quarter results, which marks a penny improvement over the company's loss in the year-ago period. The satellite radio specialist has a shaky past in the earnings confessional, matching expectations twice, besting once, and missing once. As a result, SIRI has missed expectations by an average of 50% during this time frame.

Technically, the stock has rocketed some 135% during the past year, and is currently sitting on a year-to-date gain of more than 65%. During this timeframe, SIRI has enjoyed support from its 10-week and 32-week moving averages. Currently, the equity is consolidating into support near $1.00 per share, while dealing with overhead resistance near the $1.15 level.

Despite this strong price action, investors are quite bearish on SIRI. Specifically, the stock's SOIR of 0.27 arrives higher than 88% of all those taken during the past year. Additionally, nearly 6% of the security's float remains sold short, despite a 4.6% decline in short interest during the past month. Elsewhere, analysts are divided on SIRI, with Zacks reporting that the equity has attracted three "buys" and three "holds."

Negativity on a rising stock has bullish implications from a contrarian perspective, as it means that not everyone has bought into the rally. SIRI certainly fits the bill for a potential bullish contrarian play, and the company's earnings report may create the kind of volatility that options players revel in. Keep in mind, however, that since SIRI is a penny stock by most standards, a majority of the security's open interest is centered at the 1 strike, creating the potential for the shares to get pinned due to unwinding hedges as options expiration draws nearer. What's more, with implied volatility for the August 1 call resting at 65% versus one-month historical volatility of just 43%, you will be paying considerably more than usual for that SIRI call.