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.

With that in mind, here's a look at several stocks that could experience big short squeezes when they report earnings this week.


Conn's

My first earnings short-squeeze trade idea is electronics stores player Conn's (CONN) - Get Report , which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect Conn's to report revenue of $376.77 million on earnings of 68 cents per share.

The current short interest as a percentage of the float for Conn's is extremely high at 79.6%. That means that out of the 15.92 million shares in the tradable float, 12.68 million shares are sold short by the bears. This is a monster short interest on a stock with a very low tradable float. Any bullish earnings news could easily spark a large short-squeeze post-earnings as the bears scramble to cover some of their positions.

From a technical perspective, CONN 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 strong for the last two months, with shares moving higher from its low of $26.66 to its recent high of $36.12 a share. During that uptrend, shares of CONN have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of CONN within range of triggering a major breakout trade post-earnings.

If you're bullish on CONN, 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 $36.12 to its 200-day moving average of $38.35 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 1.07 million shares. If that breakout hits post-earnings, then CONN will set up to re-fill some of its previous gap-down-day zone from late August that started near $46 a share.

I would simply avoid CONN 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 $32.40 to its 50-day moving average of $31.64 a share and then below $30 a share with high volume. If we get that move, then CONN will set up to re-test or possibly take out its next major support level at its 52-week low of $26.60 a share.

Titan Machinery

Another potential earnings short-squeeze play is agricultural and construction equipment stores operator Titan Machinery (TITN) - Get Report , which is set to release its Wednesday before the market open. Wall Street analysts, on average, expect Titan Machinery to report revenue $521.60 million on earnings of 20 cents per share.

The current short interest as a percentage of the float for Titan Machinery is extremely high at 32.3%. That means that out of the 16.91 million shares in the tradable float, 5.46 million shares are sold short by the bears. This is a large short interest on a stock with a very low tradable float. Any bullish earnings news could easily trigger a sharp short-covering rally post-earnings as the bears rush to cover some of their bets.

From a technical perspective, TITN is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last few weeks, with shares moving lower from its high of $14.92 to its new 52-week low of $11.67 a share. During that downtrend, shares of TITN have been consistently making lower highs and lower lows, which is bearish technical price action.

If you're in the bull camp on TITN, 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 $12.78 to just above $13.25 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 196,633 shares. If that breakout develops post-earnings, then TITN will set up to re-test or possibly take out its next major overhead resistance levels at $14.92 to $15.45 a share, or even $16.50 a share.

I would simply avoid TITN or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 52-week low of $11.67 a share with high volume. If we get that move, then TITN will set up to enter new 52-week-low territory, which is bearish technical price action. Some possible downside targets off that move are $10 to $9 a share, or even $8 a share.


Layne Christensen

Another potential earnings short-squeeze candidate is water management, construction and drilling services provider Layne Christensen (LAYN) , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Layne Christensen to report revenue of $211.81 million on a loss of 50 cents per share.

The current short interest as a percentage of the float for Layne Christensen is extremely high at 23.3%. That means that out of the 18.18 million shares in the tradable float, 4.24 million shares are sold short by the bears. This is another stock with a very high short interest and a low tradable float. If the bulls get the earnings news they're looking for, then shares of LAYN could easily explode sharply higher post-earnings as the bears jump to cover some of their positions.

From a technical perspective, LAYN is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been trending sideways and consolidating for the last month and change, with shares moving between $6.73 on the downside and $7.82 on the upside. Shares of LAYN are now starting to bounce off the lower-end of its recent range and it's quickly moving within range of triggering a big breakout trade post-earnings.

If you're bullish on LAYN, 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 $7.54 to $7.82 a share and then above its 50-day moving average of $7.88 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 365,034 shares. If that breakout materializes post-earnings, then LAYN will set up to re-test or possibly take out its next major overhead resistance levels at $9.69 to $11 a share.

I would avoid LAYN 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 $7 to $6.73 a share with high volume. If we get that move, then LAYN will set up to re-test or possibly take out its next major support level at its 52-week low of $5.90 a share.

Vera Bradley

Another earnings short-squeeze prospect is functional accessories for women retailer Vera Bradley (VRA) - Get Report , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Vera Bradley to report revenue of $127.52 million on earnings of 19 cents per share.

The current short interest as a percentage of the float for Vera Bradley is extremely high at 41.3%. That means that out of 21.90 million shares in the tradable float, 9.04 million shares are sold short by the bears. This is another high short-interest low float situation stock. If the bulls get the earnings news they're looking for, then shares of VRA could easily rip sharply higher post-earnings as the bears move fast to cover some of their positions.

From a technical perspective, VRA is currently trending above its 50-day moving average and just below its 2000-day moving average, which is neutral trendwise. This stock has recently started to bounce higher right off its 50-day moving average of $21.79 a share. That bounce is starting to push shares of VRA within range of triggering a major breakout trade post-earnings above some key near-term overhead resistance levels.

If you're bullish on VRA, 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 $23.52 to is 50-day at $23.70 a share and then above more resistance at $24.31 to $24.66 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 451,584 shares. If that breakout gets started post-earnings, then VRA will set up to re-test or possibly take out its next major overhead resistance levels at $28 to $30 a share, or even $31 to $34 a share.

I would simply avoid VRA 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 $21.50 to $21.16 a share with high volume. If we get that move, then VRA will set up to re-test or possibly take out its next major support levels at $19.62 to its 52-week low at $18.75 a share.

Lands End

My final earnings short-squeeze play is multi-channel retailer Lands End (LE) - Get Report , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Lands End to report revenue of $404.14 million on earnings of 40 cents per share.

The current short interest as a percentage of the float for Lands End is extremely high at 22.7%. That means that out of the 16.36 million shares in the tradable float, 3.71 million shares are sold short by the bears. This stock has a very large short interest and an extremely low tradable float. Any bullish earnings news could easily set off a monster short-covering rally post-earnings as the bears move fast to cover some of their bets.

From a technical perspective, LE is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last six months, with shares moving higher from its low of $26.44 to its recent high of $50.50 a share. During that uptrend, shares of LE have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of LE within range of triggering a big breakout trade post-earnings above some key near-term overhead resistance levels.

If you're in the bull camp on LE, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its all-time high of $50.50 a share (or above Tuesday's intraday high if greater) with high volume. Look for volume on that move that registers near or above its three-month average action of 537,839 shares. If that breakout materializes post-earnings, then LE will set up to enter new all-time-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $60 to $65 a share, or even $70 a share.

I would avoid LE 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 $45.20 a share and then below some more near-term support levels at $44.77 to $44.38 a share with high volume. If we get that move, then LE will set up to re-test or possibly take out its next major support levels at $42.12 to $38.20 a share, or even $36 to $34 a share.

To see more potential earnings short squeeze plays, check out the Earnings Short-Squeeze Plays portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

Follow Stockpickr on Twitter and become a fan on Facebook.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.