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

Sportsman's Warehouse

My first earnings short-squeeze trading opportunity is outdoor sporting goods retailer Sportsman's Warehouse(SPWH) - Get Report, which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Sportsman's Warehouse to report revenue of $187.64 million on earnings of 21 cents per share.

The current short interest as a percentage of the float for Sportsman's Warehouse is extremely high at 20.9%. That means that out of the 16.71 million shares in the tradable float, 3.49 million shares are sold short by the bears. This is a low float high short-interest situation for shares of SPWH. If this company can produce the earnings news the bulls are looking for, then shares of SPWH could easily rip sharply higher post-earnings as the bears jump to cover some of their trades.

From a technical perspective, SPWH is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last three months, with shares moving higher from its low of $6.15 to its recent high of $8.25 a share. During that uptrend, shares of SPWH have been making mostly higher lows and higher highs, which is bullish technical price action. that move has now pushed shares of SPWH within range of triggering a near-term breakout trade post-earnings.

If you're bullish on SPWH, 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 $8.25 to $8.32 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 165,048 shares. If that breakout begins post-earnings, then shares of SPWH will set up to re-test or possibly take out its next major overhead resistance levels at $8.73 to $9.50 a share, or even its 52-week high of $11 a share.

I would simply avoid SPWH or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some near-term support at $7.60 a share to its 50-day moving average of $7.42 a share with high volume. If we get that move, then SPWH will set up to re-test or possibly take out its next major support levels at its 200-day moving average of $7.05 a share to more near-term support levels at $6.81 o $6.50 a share.

CarMax

Another potential earnings short-squeeze play is used vehicles retailer CarMax(KMX) - Get Report, which is set to release its numbers on Thursday before the market open. Wall Street analysts, on average, expect CarMax to report revenue $3.50 billion on earnings of 60 cents per share.

The current short interest as a percentage of the float for CarMax is notable at 7%. That means that out of the 208.84 million shares in the tradable float, 14.70 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 5.7%, or by about 788,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of KMX could easily trend sharply higher post-earnings as the bears scramble to cover some of their trades.

From a technical perspective, KMX is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock broke out on Monday above some near-term overhead resistance levels at $67.84 to $68.41 a share with above-average volume. Market players should now watch for another key breakout trade to trigger for shares of KMX post-earnings.

If you're in the bull camp on KMX, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 52-week high at $69.29 a share (or above Wednesday'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 1.41 million shares. If that breakout triggers post-earnings, then KMX will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $75 to $80 a share, or even $85 a share.

I would simply avoid KMX 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 $66 a share to its 50-day moving average of $65.26 a share with high volume. If we get that move, then KMX will set up to re-test or possibly take out its next major support levels at $61.98 to $60.83 a share, or even its 200-day moving average of $56.69 a share.

Micron Technology

Another potential earnings short-squeeze candidate is semiconductor solutions provider Micron Technology(MU) - Get Report, which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Micron Technology to report revenue of $4.18 billion on earnings of 75 cents per share.

The current short interest as a percentage of the float for Micron Technology stands at 6.9%. That means that out of the 1.07 billion shares in the tradable float, 74.22 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 3.6%, or by about 2.60 million shares. If the bears get caught pressing their bets into a bullish quarter, then shares of MU could easily rip sharply higher post-earnings as the bears rush to cover some of their trades.

From a technical perspective, MU 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 four months, with shares moving lower from its high of $36.59 to its recent low of $26.61 a share. During that downtrend, shares of MU have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of MU have started to bounce a bit off that $25.61 low and it's now moving within range of triggering a near-term breakout trade post-earnings.

If you're bullish on MU, then I would wait until after its report and look for long-biased trades if this stock manages to break out some key near-term overhead resistance levels at $28 to $29.26 a share and then above its 50-day moving average of $29.47 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 25.36 million shares. If that breakout kicks off post-earnings, then MU will set up to re-test or possibly take out its next major overhead resistance levels at $31.50 to its 200-day moving average of $31.86 a share, or even $33 a share.

I would avoid MU 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 $25.61 a share with high volume. If we get that move, then MU will set up to re-test or possibly take out its next major support level at its 52-week low of $21.02

Perry Ellis

Another earnings short-squeeze prospect is apparel clothing player Perry Ellis(PERY) - Get Report, which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Perry Ellis to report revenue of $217.74 million on earnings of 3 cents per share.

The current short interest as a percentage of the float for Perry Ellis is notable at 6.8%. That means that out of 11.41 million shares in the tradable float, 778,500 shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a decent short-covering rally post-earnings if the bulls get the earnings news they're looking for.

From a technical perspective, PERY is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been consolidating a bit and trending sideways over the last month or so, with shares moving between $21.50 on the downside and $24.79 on the upside. Any high-volume move above the upper-end of its recent range post-earnings could trigger a big breakout trade for shares of PERY.

If you're bullish on PERY, 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 its 50-day moving average of $23.55 a share to more near-term resistance levels at $23.78 to $24.79 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 114,132 shares. If that breakout gets started post-earnings, then PERY will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $27 a share.

I would simply avoid PERY 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 $22.17 to its 200-day moving average of $21.77 a share and then below more support at $21.50 share with high volume. If we get that move, then PERY will set up re-test or possibly take out its next major support levels at $19.75 to $19.27 a share.

Sigma Designs

My final earnings short-squeeze trading opportunity is specialized semiconductor player Sigma Designs (SIGM) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Sigma Designs to report revenue of $53.16 million on earnings of 1 cent per share.

The current short interest as a percentage of the float for Sigma Designs is notable at 4.5%. That means that out of the 33.43 million shares in the tradable float, 1.52 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 3.1%, or by about 45,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of SIGM could easily spike sharply higher post-earnings as the bears move fast to cover some of their trades.

From a technical perspective, SIGM 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 $3.65 to its recent high of $8.33 a share. During that uptrend, shares of SIGM have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of SIGM within range of triggering a near-term breakout trade post-earnings.

If you're in the bull camp on SIGM, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 52-week high of $8.33 a share (or above Wednesday'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 410,069 shares. If that breakout develops post-earnings, then SIGM will setup to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $10 to $11 a share, or even $12 a share.

I would avoid SIGM 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 $7.61 a share to its 50-day moving average of $7.16 a share with volume. If we get that move, then SIGM will set up to re-test or possibly take out its next major support levels at $6.81 to $6.50 a share, ore even $6.24 to $6 a share.

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