Lululemon Athletica inc (LULU) is scheduled to report earnings after the close tonight. This could be a potentially explosive situation to watch.

As the chart to the right shows, short interest has been steadily increasing. According to data collected by our Quantified Analysis group, 79% of the stock's float is now sold short. However, a look to the chart below shows the shares have been range bound since bouncing off their mid-March lows.

Given the steady increase in short interest it seems clear that the bears are looking for a continuation of the decline that began in late-December. If (and a big "if" here) the company can offer an upbeat report there could be a bit of a rush to the exits from the shorts.

Chart Courtesy of Thomson Financial