1 Stock Set for Huge Moves on Wednesday

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

We're in the middle of earnings season, and that means lots of stocks are making big moves. Most of the time, we don't know which stocks will be making those moves beforehand.

But a group of stocks sharing two distinct variables have all the telltale signs of making big moves. These stocks are both reporting earnings, and both have a lot of investors betting against them. Last week, I identified three such stocks, and they moved an average of 12% following earnings.

Tomorrow, there's one stock in particular that seems primed for outsized moves. Here's what to look for when it reports earnings.

Company

% of Shares Short

Expected Revenue

Expected EPS

Radian Group (NYSE: RDN  )

27%

$220 million

$0

Source: finviz.com, E*Trade.

The Radian Group is in the business of providing insurance to financial institutions that offer homebuyers mortgage loans. Though these lenders hope that their own due diligence lessens the chance of default on their loans, there's never a 100% guarantee that all lenders will pay back in full. That's where Radian Group comes in.

  

As you might expect, Radian's stock absolutely plummeted following the financial crisis a few years back. From a high of $63 per share in May of 2007, the company's stock fell to just $1 in June of the next year -- a 98% drop.

Since then, however, shares have recovered nicely -- though they're still nowhere near their pre-recession highs. Obviously, there are still a fair number of investors who think the mortgages Radian insures are more toxic than Wall Street is assuming. Indeed, over the past two years, Radian has failed to report a profit. And analysts estimate that this will be the case again this quarter.

But investors should remember that the housing market has been recovering -- if slowly -- for quite some time now. Radian has offset many of its policies written before the recession by writing billions of new ones as well. And the company's partnership with the National Association of Hispanic Real Estate Professionals promises to expose it to one of the fastest-growing cohorts of homeowners.

How to use this information
None of this is to say that it would be a wise idea either to buy or to sell Radian shares right now. We here at the Fool believe that timing the market is a losing game and that long-term buy-to-hold investing is the most tried-and-true path to financial independence.

So rather than being an invitation to gamble on Radian following its earnings release, this is a heads-up to investors who might already hold the stock. Hopefully, you'll be able to prepare yourself for the stock's big moves, take a deep breath, and think clearly before making any decisions on what to do with the stock following tomorrow's release.

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