Squeezing the Shorts: Earnings Season

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By Jonas Elmerraji

BALTIMORE (TheStreet) -- Nothing moves the market like earnings season. With that time upon us once again, the potential for some seriously profitable short squeezes is very real in the next few weeks.

A short squeeze is the buying frenzy that ensues when a heavily shorted stock starts to look attractive again to investors. As more and more of the short investors buy shares to cover their positions, share prices skyrocket. Almost anything can trigger a short squeeze, including trumping earnings expectations, winning a lawsuit, unveiling a new product and even announcing a management change.

One of the best indicators of just how high a short-squeezed stock could go is the short interest ratio , which divides shares short by average daily trading volume in order to get a ballpark estimate of the number of days it would take for short-sellers to cover their positions. The higher the short ratio, the higher the potential profits when the shorts get squeezed.

With this in mind, Stockpickr has created a portfolio of stocks this week with high short interest ratios and the catalysts to trigger a squeeze. Here's a look at this week's potential plays.

Financial publisher Morningstar(MORN Quote), which usually doles out its own coveted research to investors who subscribe to its premium services, has found itself on the receiving end of Wall Street's analysis lately. Investors are nervous about its recent round of insider sales as well as the chance that some of the company's international capital investments add some unnecessary risk to the balance sheet. Short-sellers have propelled the company's short interest ratio, which was at 21.4 as of Sept. 25.