DELAFIELD, Wis. (Stockpickr) -- Short-sellers hate being caught short a stock that reports a blowout quarter. When this happens, we often see a tradable short squeeze develop as the bears rush to cover their positions to avoid big losses. Even the best short-sellers know that it's never a great idea to stay short once a bullish earnings report sparks a big short-covering rally.

This is why I scan the market for heavily shorted stocks that are about to report earnings. You only need to find a few of these stocks in a year to help enhance your portfolio returns -- the gains become so outsized in such a short time frame that your profits add up quickly.

That said, let's not forget that stocks are heavily shorted for a reason, so you have to use trading discipline and sound money management when playing earnings short-squeeze candidates. It's important that you don't go betting the farm on these plays and that you manage your risk accordingly. Sometimes the best play is to wait for the stock to break out following the report before you jump in to profit off a short squeeze. This way, you're letting the trend emerge after the market has digested all of the news.

Of course, sometimes the stock is going to be in such high demand that you risk missing a lot of the move by waiting. That's why it can be worth betting prior to the report -- but only if the stock is acting technically very bullish and you have a very strong conviction that it is going to rip higher. Just remember that even when you have that conviction and have done your due diligence, the stock can still get hammered if Wall Street doesn't like the numbers or guidance.

If you do decide to bet ahead of a quarter, then you might want to use options to limit your capital exposure. Heavily shorted stocks are usually the names that make the biggest post-earnings moves and have the most volatility. I personally prefer to wait until all the earnings-related news is out for a heavily shorted stock and then jump in and trade the prevailing trend.

Bio-Reference Laboratories

My first earnings short-squeeze play is clinical laboratory testing services player Bio-Reference Laboratories (BRLI) , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Bio-Reference Laboratories to report revenue of $228.81 million on earnings of 63 cents per share.

The current short interest as a percentage of the float for Bio-Reference Laboratories is extremely high at 20.7%. That means that out of the 24.55 million shares in the tradable float, 5.09 million shares are sold short by the bears. This is a low-float high short-interest situation stock. Any bullish earnings news could easily set off a large short-covering rally for shares of BRLI post-earnings if the bears are forced into covering some of their positions.

From a technical perspective, BRLI is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has just started to bounce higher right above its recent low of $26.32 a share with strong upside volume flows. That spike is starting to push shares of BRLI within range of triggering a big breakout trade post-earnings above some key near-term overhead resistance levels.

If you're bullish on BRLI, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $28.77 to $28.99 a share and then above more resistance at $30.50 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 184,917 shares. If that breakout hits post-earnings, then BRLI will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $34 a share to around $38 a share.

I would simply avoid BRLI or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some key near-term support levels at $26.32 to $26 a share with high volume. If we get that move, then BRLI will set up to re-test or possibly take out its next major support levels at $24 to $23.36 a share.

Pier 1 Imports

Another potential earnings short-squeeze trade idea is home furnishing stores operator Pier 1 Imports(PIR) - Get Report , which is set to release its numbers on Thursday after the market close. Wall Street analysts, on average, expect Pier 1 Imports to report revenue $488.09 million on earnings of 20 cents per share.

The current short interest as a percentage of the float for Pier 1 Imports is pretty high at 9.1%. That means that out of the 87.73 million shares in the tradable float, 8.06 million shares are sold short by the bears. If this company can deliver this earnings news the bulls are looking for, then shares of PIR could easily jump sharply higher post-earnings as the bears move fast to cover some of their trades.

From a technical perspective, PIR is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been uptrending over the last two months and change, with shares moving higher from its low of $11.36 to its recent high of $14.26 a share. During that uptrend, shares of PIR have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of PIR within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on PIR, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance at $14.26 a share (or above Thursday's intraday high if greater) with high volume. Look for volume on that move that hits near or above its three-month average volume of 2.61 million shares. If that breakout materializes post-earnings, then PIR will set up to re-test or possibly take out its next major overhead resistance levels at $16 to $16.40 a share, or even $18 to $19 a share.

I would simply avoid PIR or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some near-term support levels at $13.07 to its 50-day moving average of $13.02 a share with high volume. If we get that move, then PIR will set up to re-test or possibly take out its next major support levels at $11.64 to its 52-week low of $11.42 a share.

Scholastic

Another potential earnings short-squeeze candidate is children's publishing, education and media player Scholastic(SCHL) - Get Report , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Scholastic to report revenue of $636.40 million on earnings of $2.22 per share.

The current short interest as a percentage of the float for Scholastic is very high at 11.4%. That means that out of the 28.28 million shares in the tradable float, 3.22 million shares are sold short by the bears. This is another high short-interest low-float situation stock. Any bullish earnings news could easily trigger a sharp short-covering rally for shares of SCHL post-earnings if the bears are forced to cover some of their trades.

From a technical perspective, SCHL is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last two months and change, with shares moving higher from its low of $30.35 to its recent high of $36.23 a share. During that uptrend, shares of SCHL have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of SCHL within range of triggering a big breakout trade post-earnings.

If you're bullish on SCHL, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some key overhead resistance levels at $35.80 to $36.23 a share and then above its 52-week high at $36.87 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 124,503 shares. If that breakout develops post-earnings, then SCHL will set-up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $45 to $50 a share.

I would avoid SCHL or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some key near-term support at around $32.50 to $32 a share with high volume. If we get that move, then SCHL will set up to re-test or possibly take out its next major support levels at $30.35 to $30.31 a share. Any high-volume move below those levels will then give SCHL a chance to tag $29 to $28 a share.

BlackBerry

Another earnings short-squeeze prospect is wireless communications solutions provider BlackBerry (BBRY) , which is set to release numbers on Friday before the market open. Wall Street analysts, on average, expect BlackBerry to report revenue of $937.41 million on a loss of 5 cents per share.

The current short interest as a percentage of the float for BlackBerry is extremely high at 23.2%. That means that out of 480.12 million shares in the tradable float, 111.37 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 12.4%, or by around 12.32 million shares. If the bears get caught pressing the bets into a bullish quarter, then shares of BBRY could easily see a sharp short-covering rally post-earnings as shorts scramble to cover some of their positions.

From a technical perspective, BBRY is currently trending below its 50-day moving average and right above its 200-day moving average, which is neutral trendwise. This stock has been downtrending over the last month, with shares moving lower from its high of $12.54 to its recent low of $9.40 a share. During that downtrend, shares of BBRY have been making mostly lower highs and lower lows, which is bearish technical price action.

If you're bullish on BBRY, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 50-day moving average of $10.22 a share and then above some more near-term overhead resistance at $11.07 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 13.72 million shares. If that breakout gets set off post-earnings, then BBRY will set up to re-test or possibly take out its 52-week high at $12.54 a share. Any high-volume move above that level will then give BBRY a chance to tag $13 to $14, or even $15 a share.

I would simply avoid BBRY or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some key near-term support levels at around $9 to $8.65 a share with high volume. If we get that move, then BBRY will set up to re-test or possibly take out its next major support levels at $8 to $7 a share.

Winnebago Industries

My final earnings short-squeeze play is recreational vehicles player Winnebago Industries(WGO) - Get Report , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Winnebago Industries to report revenue of $234.64 million on earnings of 45 cents per share.

The current short interest as a percentage of the float for Winnebago Industries is pretty high at $11.3%. That means that out of the 26.53 million shares in the tradable float, 3.01 million shares are sold short by the bears. This is a decent short interest on a stock with a relatively low tradable float. Any bullish earnings news could easily spark a large short-squeeze for shares of WGO post-earnings.

From a technical perspective, WGO is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock has been uptrending over the last two months and change, with shares moving higher from its low of $20.17 to its recent high of $26.44 a share. During that uptrend, shares of WGO have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of WGO within range of triggering a near-term breakout trade post-earnings.

If you're in the bull camp on WGO, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some key overhead resistance levels at $26.04 to $26.44 a share and then above $26.60 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 329,808 shares. If that breakout triggers post-earnings, then WGO will set up to re-test or possibly take out its next major overhead resistance levels at $28.32 to $28.78 a share, or even its 52-week high at $32.17 a share.

I would avoid WGO or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 50-day moving average of $22.97 a share with high volume. If we get that move, then WGO will set up to re-test or possibly take out its next major support level at its 52-week low of $20.25 a share. Any high-volume move below that level will then give WGO a chance to tag $18 to $17 a share, or even $16.50 a share.

-- Written by Roberto Pedone in Delafield, Wis.

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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com.

You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com

and

Forbes.com

. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.