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.

Vocera Communications

My first earnings short-squeeze trade idea is mobile technology player Vocera Communications (VCRA) - Get Report , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Vocera Communications to report revenue of $21.66 million on a loss of 19 cents per share.

The current short interest as a percentage of the float for Vocera Communications is pretty high at 8.4%. That means that out of the 23.13 million shares in the tradable float, 1.95 million shares are sold short by the bears. This is a decent short interest on a stock with a very low tradable float. Any bullish earnings news could easily kick off a large short-squeeze for shares of VCRA post-earnings as the bears rush to cover some of their trades.

From a technical perspective, VCRA is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock has been uptrending a bit for the last month, with shares moving higher from its low of $7.58 to its intraday high of $9.27 a share. During that move, shares of VCRA have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of VCRA within range of triggering a major breakout trade post-earnings.

If you're bullish on VCRA, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its gap-down-day high from August at around $10 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 292,298 shares. If that breakout triggers post-earnings, then VCRA will set up to re-fill some of its previous gap-down-day zone that started above $12 a share.

I would simply avoid VCRA 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 $8.55 a share and then below some more near-term support at $8.39 a share with high volume. If we get that move, then VCRA will set up to re-test or possibly take out its 52-week low of $7.58 a share.

Walter Energy

Another potential earnings short-squeeze play is basic materials player Walter Energy (WLT) , which is set to release its numbers on Thursday before the market open. Wall Street analysts, on average, expect Walter Energy to report revenue $333.82 million on a loss of $1.63 per share.

The current short interest as a percentage of the float for Walter Energy is extremely high at 66.7%. That means that out of the 65.56 million shares in the tradable float, 43.67 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 1.6%, or by 693,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of WLT could easily rip sharply higher post-earnings as the shorts scramble to cover some of their positions.

From a technical perspective, WLT is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last three months, with shares sliding lower from its high of $6.84 to its new 52-week lowof $1.47 a share. During that downtrend, shares of WLT have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of WLT have now started to rebound off that $1.47 low and it's quickly moving within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on WLT, 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 $2.50 to $2.64 a share and then above $3 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 5.84 million shares. If that breakout triggers post-earnings, then WLT will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $3.37 a share to $4 a share.

I would simply avoid WLT 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 $2 a share with high volume. If we get that move, then WLT will set up to re-test or possibly take out its next major support level at its 52-week low of $1.47 a share.

K2M Group

Another potential earnings short-squeeze candidate is medical device player K2M Group (KTWO) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect K2M Group to report revenue of $43.96 million on a loss of 33 cents per share.

The current short interest as a percentage of the float for K2M Group is pretty high at 10%. That means that out of the 11.09 million shares in the tradable float, 1.11 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of KTWO could easily rip sharply higher post-earnings as the bears rush to cover some of their bets. Keep in mind that this company has a very low float, so a good quarter could produce a massive short-squeeze.

From a technical perspective, KTWO is currently trending above its 50-day moving average, which is bullish. This stock has been consolidating and trending sideways for the last two months and change, with shares moving between $12.31 on the downside and $15.38 on the upside. Any high-volume move above the upper-end of its recent sideways trading chart pattern post-earnings could easily trigger a big breakout trade for shares of KTWO.

If you're bullish on KTWO, 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 $15.07 to $15.38 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 102,503 shares. If that breakout materializes post-earnings, then KTWO will set up to re-test or possibly take out its next major overhead resistance levels at $17.46 to its all-time high at $17.98 a share. Any high-volume move above $17.98 will then give KTWO a chance to tag or trend north of $20 a share.

I would avoid KTWO 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 $13.70 to $13.27 a share with high volume. If we get that move, then KTWO will set up to re-test or possibly take out its all-time low of $12.31 a share.

Carbo Ceramics

Another earnings short-squeeze prospect is oilfield services technology player Carbo Ceramics (CRR) - Get Report , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect CARBO Ceramics to report revenue of $154.31 million on earnings of 75 cents per share.

The current short interest as a percentage of the float for CARBO Ceramics is extremely high at 23.9%. That means that out of 19.73 million shares in the tradable float, 4.73 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 set off a large short-squeeze post-earnings that forces the bears to get out of some of their positions.

From a technical perspective, CRR is currently trending well below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last four months, with shares collapsing from its high of $155.64 to its new 52-week low of $48.16 a share. During that downtrend, shares of CRR have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of CRR have recently formed a double bottom chart pattern at $48.48 to $48.16 a share. The stock is now starting to rebound off those support levels and it's quickly moving within range of triggering a major breakout trade post-earnings.

If you're bullish on CRR, 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 $56.11 to $57.67 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 1.08 million shares. If that breakout develops post-earnings, then CRR will set up to re-test or possibly take out its next major overhead resistance levels at $70 a share to its 50-day moving average of $77.67 a share.

I would simply avoid CRR or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its new 52-week low of $48.16 a share with high volume. If we get that move, then CRR will set up to enter new 52-week-low territory, which is bearish technical price action. Some possible downside targets off that move are $40 to $35 a share.

Control4

My final earnings short-squeeze play is automation and control solutions for the connected home playerControl4 (CTRL) - Get Report , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Control4 to report revenue of $39.02 million on earnings of 14 cents per share.

The current short interest as a percentage of the float for Control4 is very high at 17.4%. That means that out of the 17.72 million shares in the tradable float, 3.08 million shares are sold short by the bears. This is a big short interest on a stock with a very low tradable float. This is the type of situation that can produce a monster short-squeeze if the bulls get the earnings news they're looking for. The reason for that is because the buying pressure can overwhelm the bears very quickly if a strong quarter raises the demand for shares of CTRL.

From a technical perspective, CTRL is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending a bit over the last month, with shares moving higher from its low of $11.76 to its recent high of $14.36 a share. During that uptrend, shares of CTRL have been making mostly higher lows and higher highs, which is bullish technical price action. That uptrend is coming after shares of CTRL downtrended badly from July to October, with the stock crashing from its high of $20.20 to that $11.76 low. Shares of CTRL are now starting to trend within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on CTRL, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some key near-term overhead resistance levels at $13.76 to $14.36 a share and then above $14.75 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 318,538 shares. If that breakout kicks off post-earnings, then CTRL will set up to re-test or possibly take out its next major overhead resistance levels at $16.21 to $17.58 a share, or even its 200-day moving average of $18.08 a share.

I would avoid CTRL 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 $12.61 a share to its all-time low of $11.76 a share with high volume. If we get that move, then CTRL will set up to enter new all-time-low territory, which is bearish technical price action.

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.

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.