DELAFIELD, Wis. (Stockpickr) -- A prevailing trend in the stock market right now is extreme volatility, and that trend looks likely to continue as currency and commodity markets remain beholden to monetary policy driven by central banks around the globe. Such volatility can create opportunities for short-term traders.

I like to look for such opportunities in heavily shorted stocks that are likely to report bullish earnings. When a heavily shorted stock reports a blowout quarter, we often see a tradable short squeeze develop as the bears rush to cover their positions and 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.

Of course, 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, let's take a look at several stocks that could experience big short squeezes when they report earnings this week.

Cheetah Mobile

My first earnings short-squeeze trade idea is China-based mission critical applications platform operator Cheetah Mobile (CMCM) - Get Cheetah Mobile, Inc. ADR Class A Report, which is set to release numbers on Friday before the market open. Wall Street analysts, on average, expect Cheetah Mobile to report revenue of $91.76 million on earnings of 9 cents per share.

The current short interest as a percentage of the float for Cheetah Mobile is extremely high at 79.2%. That means that out of the 9.46 million shares in the tradable float, 7.49 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 4.6%, or by about 331,000 shares. If the shorts get caught pressing their bets into a bullish quarter, then shares of CMCM could easily explode sharply higher post-earnings as the bears move fast to cover some of their trades.

From a technical perspective, CMCM is currently trending right at its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock has been uptrending a bit over the last month, with shares moving higher from its low of $16.56 to its intraday high on Monday of $19.64 a share. During that move, shares of CMCM have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of CMCM within range of triggering a big breakout trade above some key overhead resistance levels post-earnings.

If you're bullish on CMCM, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 200-day moving average of $20 a share to more key overhead resistance levels at $21.54 to $21.67 with high volume. Look for volume on that move that registers near or above its three-month average action of 571,625 shares. If that breakout triggers post-earnings, then shares of CMCM will set up to re-test or possibly take out its next major overhead resistance levels at $26 to its all-time high at $30.77 a share.

I would simply avoid CMCM 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 $17 to $16.56 a share with high volume. If we get that move, then CMCM will set up to re-test or possibly take out its next major support levels at $14.76 to $14 a share.

NQ Mobile

Another potential earnings short-squeeze play is China-based mobile Internet services provider NQ Mobile (NQ) , which is set to release its numbers on Wednesday after the market close. Wall Street analysts, on average, expect NQ Mobile to report revenue $83 million on earnings of 2 cents per share.

The current short interest as a percentage of the float for NQ Mobile is very high at 19.7%. That means that out of the 69.87 million shares in the tradable float, 13.80 million shares are sold short by the bears. If this company can produce the earnings news the bulls are looking for, then shares of NQ could easily rip sharply higher post-earnings as the bears scramble to cover some of their positions.

From a technical perspective, NQ is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been attempting to carve out a major bottoming chart pattern over the last two months, with shares finding buying interest at $3.22 to $3.42 a share. Shares of NQ have now started to spike higher right above those support levels and the stock tested its 50-day moving average of $3.92 a share during Monday's trading session. That move is now starting to push shares of NQ within range of triggering a near-term breakout trade above some key overhead resistance levels post-earnings.

If you're in the bull camp on NQ, 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 $4 to $4.31 a share and then above $4.35 to $4.73 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 2.37 million shares. If that breakout develops post-earnings, then NQ will set up to re-test or possibly take out its next major overhead resistance levels at $5.08 to $5.53 a share, or even its 200-day moving average of $5.95 a share.

I would simply avoid NQ 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 $3.42 to its 52-week low of $3.22 a share with high volume. If we get that move, then NQ will set up to enter new 52-week-low territory below $3.22, which is bearish technical price action. Some possible downside targets off that move are $3 to $2.50 a share.

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Vince Holdings

Another potential earnings short-squeeze candidate is diversified apparel clothing player Vince Holdings (VNCE) - Get Vince Holding Corp. Report, which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Vince Holdings to report revenue of $98.98 million on earnings of 26 cents per share.

The current short interest as a percentage of the float for Vince Holdings is very high at 16.3%. That means that out of the 14.63 million shares in the tradable float, 2.38 million shares are sold short by the bears. This is large short interest and low float situation stock. Any bullish earnings news could easily set off a sold short-covering rally for shares of VNCE post-earnings as the bears jump to cover some of their bets.

From a technical perspective, VNCE 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 and change, with shares falling sharply from its high of $37.68 to its intraday low on Monday of $20.37 a share. During that downtrend, shares of VNCE have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of VNCE have now entered oversold territory, since its current relative strength index reading is 23.8. A solid earnings report could now produce a large oversold bounce for shares of VNCE post-earnings.

If you're bullish on VNCE, 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 $22 a share to its 50-day moving average of $23.36 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 349,869 shares. If that breakout gets started post-earnings, then VNCE will set up to re-test or possibly take out its next major overhead resistance levels at $25.30 to $25.59 a share, or even $30 a share.

I would avoid VNCE or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its all-time low of $20.37 a share (or below Wednesday's intraday low if lower) with high volume. If we get that move, then VNCE will set up to enter new all-time-low territory, which is bearish technical price action. Some possible downside targets off that move are $17 to $15 a share.

Health Insurance Innovations

Another earnings short-squeeze prospect is Web-based individual health insurance plans developer and administrator Health Insurance Innovations (HIIQ) - Get Health Insurance Innovations, Inc. Class A Report, which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Health Insurance Innovations to report revenue of $24.88 million on earnings of 6 cents per share.

The current short interest as a percentage of the float for Health Insurance Innovations is extremely high at 21.3%. That means that out of 5.93 million shares in the tradable float, 1.26 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 spark a big short-covering rally post-earnings for shares of HIIQ that forces the bears to cover some of their positions.

From a technical perspective, HIIQ is currently trending right at its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been consolidating and trending sideways over the last two months and change, with shares moving between $6.65 on the downside and $8.24 on the upside. Shares of HIIQ are now starting to trend within range of triggering a big breakout trade post-earnings above the upper-end of its recent sideways trading chart pattern.

If you're bullish on HIIQ, 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 $7.72 to $8.11 a share and then above $8.24 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 59,497 shares. If that breakout materializes post-earnings, then HIIQ will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $9.69 to close to $11 a share.

I would simply avoid HIIQ 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 $6.68 a share with high volume. If we get that move, then HIIQ will set up re-test or possibly take out its all-time low of $5.30 a share.

KB Home

My final earnings short-squeeze play is homebuilding player KB Home (KBH) - Get KB Home Report, which is set to release numbers on Friday before the market open. Wall Street analysts, on average, expect KB Home to report revenue of $474.31 million on earnings of 2 cents per share.

The current short interest as a percentage of the float for KB Home is extremely high at 23.6%. That means that out of the 80.74 million shares in the tradable float, 19.07 million shares are sold short by the bears. If KB Home can produce the earnings news the bulls are looking for, then this stock could easily squeeze the shorts post-earnings as the bears move fast to cover some of their trades.

From a technical perspective, KBH is currently trending just below its 50-day moving average and well below its 200-day moving average, which is bearish. This stock has been downtrending over the last month and change, with shares falling from its high of $14.53 to its recent low of $13.21 a share. During that downtrend, shares of KBH have been making mostly lower highs and lower lows, which is bearish technical price action. As shares of KBH have downtrend over that period the stock has been falling right around its 50-day moving average. That said, the stock is still trending within range of triggering a near-term breakout trade post-earnings above some key overhead resistance levels.

If you're in the bull camp on KBH, 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 $13.73 a share to some more near-term overhead resistance levels at $14.42 to $14.53 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 4.87 million shares. If that breakout hits post-earnings, then KBH will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $15.92 a share to around $17 a share.

I would avoid KBH 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 $13.21 to $13 a share with volume. If we get that move, then KBH will set up to re-test or possibly take out its next major support level at its 52-week low of $11.76 a share.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.