With that in mind, here's a look at several stocks that could experience big short squeezes when they report earnings this week.
My first earnings short-squeeze play is Nuance Communications (NUAN - Get Report), which is set to release numbers on Monday after the market close. This is a provider of voice and language solutions for businesses and consumers around the world. Wall Street analysts, on average, expect Nuance Communications to report revenue of $496.51 million on earnings of 48 cents per share.Just recently, Oppenheimer said that they believe Nuance Communications trends remain solid and they anticipate the company's results to be at least in-line with expectations. The firm expects Nuance to provide fiscal year 2013 guidance that shows double digit growth rates and Oppenheimer maintains an outperform rating on the stock. The current short interest as a percentage of the float for Nuance Communications is notable at 7%. That means that out of the 245.42 million shares in the tradable float, 17.24 million shares are sold short by the bears. From a technical perspective, NUAN is currently trending below both its 200-day and 50-day moving averages, which is bearish. This stock has been downtrending during the last two months, with shares dropping from its high of $25.89 to its recent low of $20.14 a share. During that move lower, shares of NUAN have been consistently making lower highs and lower low, which is bearish technical price action. That said, the stock has started to find some high-volume buying interest right above some previous support at $19.58 a share. If you're bullish on NUAN, then I would wait until after its report and look for long-biased trades as long as this stock is trending above $20.14 to $19.58 a share with strong upside volume flows. I would consider any upside volume day that registers near or above its three-month average volume of 2,627,150 shares as bullish. Some possible upside targets are $23 to $25 a share if NUAN gets squeezed post-earnings. I would simply avoid NUAN or look for short-biased trades if after earnings it drops back below some key near-term support levels at $19.58 to $19.33 a share with heavy volume. If we get that action, then NUAN will set up to re-test or possibly take out its next major support levels at $18 to 17 a share. Keep in mind that any move below $19.33 a share will push NUAN into new 52-week low territory, which is bearish technical price action.