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As Trulia Soars, Is Zillow Ripe for a Short Squeeze?

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Shares of Zillow (NASDAQ: Z) traded up over nine percent early Wednesday ahead of the company's earnings report. Fundamentally, there was little specific news to explain the move in Zillow. Shares were likely seeing a pop in line with Trulia (NYSE: TRLA), another real estate website.

Trulia reported earnings Tuesday night that were actually weaker than expected. The company posted an adjusted loss of $0.03 -- analysts had only been expecting a $0.02 loss. However, revenue was a bit better than expected at $18.5 million, more than the $17.02 million estimate.

In addition, the company upped its guidance. Now, Trulia guides first quarter sales $20.8-21.2 million, more than the $19.20 million estimate. Trulia's subscriptions and traffic were up significantly over the last year.

Shares of Trulia were up nearly 24% early Wednesday.

Zillow is set to report earnings after the bell. If the company's results are as impressive as Trulia's, then traders might anticipate a powerful rally in the after-hours session.

Roughly 36% of Zillow's shares are sold short. An impressive earnings report could send shorts scrambling to cover.

Shares of Zillow traded near $39 on Wednesday, while Trulia shares were near $29.

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