Watch out below: GameStop is tipped to fall after earnings based on a historical precedent

GameStop (NYSE:GME) is due to issue its Q3 earnings report after the closing bell on Tuesday. Analysts expect the retailer to report revenue of $887.7 million (-17.7% year-over-year) and a loss of $0.03 per share.

S3 Partners is a paying attention to one strong pre-earnings signal in particular. The firm noted that both GME’s stock price and short interest have risen recently, which has been a historically bearish combination for the earnings share price reaction.

S3’s breakdown: “When both metrics—stock price increase and rising short interest—are observed, the stock has historically tended to decline afterward. GME is a highly volatile stock and can move 10% up or down on earnings announcements. The only time GME saw significant gains was when the short interest as a percent of float was slightly lower.”

Short interest on GameStop (GME) stands at 7.1% of the total float.

Shares of GameStop (GME) were down 1.6% in afternoon trading on Tuesday. GME has bolted twice this year to above the $40 level but was swapping hands below $28 in front of the earnings release.