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.

Jakks Pacific

My first earnings short-squeeze play is toy and games maker Jakks Pacific (JAKK) - Get Report , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Jakks Pacific to report revenue of $321.74 million on earnings of 99 cents per share.

The current short interest as a percentage of the float for Jakks Pacific is extremely high at 72.6%. That means that out of the 12.87 million shares in the tradable float, 9.34 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 huge short-squeeze for shares of JAKK post-earnings as the bears scramble to cover some of their positions.

From a technical perspective, JAKK is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last month, with shares moving higher from its low of $6.46 to its recent high of $8.20 a share. During that move, shares of JAKK have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of JAKK within range of triggering a big breakout trade post-earnings.

If you're bullish on JAKK, 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 $8.20 to $8.59 a share and then above $9 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 474,408 shares. If that breakout gets underway post-earnings, then JAKK will set up to re-test or possibly takeout its next major overhead resistance levels at $9.48 a share. Any high-volume move above $9.48 will then give JAKK a chance to re-fill some of its previous gap-down-day zone from July of 2013 that started at $11.75 a share.

I would simply avoid JAKK or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 200-day moving average of $7.31 and its 50-day moving average of $7.08 a share with high volume. If we get that move, then JAKK will set up to re-test or possibly take out its next major support levels at $6.46 to $6.23 a share. Any high-volume move below those levels will then give JAKK a chance to re-test or possibly take out its next major support level at $5.45 a share.

Life Time Fitness

Another potential earnings short-squeeze trade idea is fitness and spa center operator Life Time Fitness (LTM) - Get Report , which is set to release its numbers on Thursday before the market open. Wall Street analysts, on average, expect Life Time Fitness to report revenue $340.94 million on earnings of 86 cents per share.

The current short interest as a percentage of the float for Life Time Fitness is very high at 18.9%. That means that out of the 29.90 million shares in the tradable float, 5.65 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 2.5%, or by 140,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of LTM could easily jump sharply higher post-earnings as the shorts move to cover some of their trades.

From a technical perspective, LTM is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has recent formed a double bottom chart pattern at $45.95 to $46.70 a share. Following that bottom, shares of LTM have started to spike a bit higher and it's quickly moving within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on LTM, 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 $49.46 to $51.47 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 688,387 shares. If that breakout triggers post-earnings, then LTM will set up to re-test or possibly take out its next major overhead resistance levels at $56.78 to $56.94 a share. Any high-volume move above those levels will then give LTM a chance to tag or take out $60 a share.

I would simply avoid LTM or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below those double bottom support levels at $46.70 to $45.95 a share with high volume. If we get that move, then LTM will set up to re-fill some of its previous gap-up-day zone from August that started near $40 a share.

GrubHub

Another potential earnings short-squeeze candidate is online and mobile platform for restaurant pick-up and delivery orders player GrubHub (GRUB) - Get Report , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect GrubHub to report revenue of $57.51 million on earnings of 6 cents per share.

Recently, JMP Securities initiated coverage on shares of GrubHub with an outperform rating. The firm said that GrubHub can deliver solid growth in a fragmented market.

The current short interest as a percentage of the float for GrubHub is pretty high at 9.6%. That means that out of the 57.20 million shares in the tradable float, 5.51 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 25.6%, or by 1.12 million shares. If the bears get caught pressing their bets into a bullish quarter, then shares of GRUB could easily rip sharply higher post-earnings as the shorts run to cover some of their positions.

From a technical perspective, GRUB is currently trending below its 50-day moving average, which is bearish. This stock has been uptrending a bit over the last month, with shares moving higher from its low of $33.57 to its recent high of $37.71 a share. During that move, shares of GRUB have been making mostly higher lows and higher highs, which is bullish technical price action. That uptrend took hold after shares of GRUB trended down sharply from August to October from $48.50 to that low of $33.57 a share. Shares of GRUB are now trending within range of triggering a near-term breakout trade post-earnings.

If you're bullish on GRUB, 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 $37.71 a share to its 50-day moving average of $38.23 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 782,132 shares. If that breakout develops post-earnings, then GRUB will set up to re-test or possibly take out its next major overhead resistance levels at $40.99 to $42 a share. Any high-volume move above those levels will then give GRUB a chance to re-test or possibly take out its all-time high at $45.80 a share.

I would avoid GRUB 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 $34.33 to $33.57 a share with high volume. If we get that move, then GRUB will set up to re-test or possibly take out its next major support level at $30 to its all-time low at $29.86 a share.

Maxwell Technologies

Another earnings short-squeeze prospect is energy storage and power delivery products developer Maxwell Technologies (MXWL) - Get Report , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Maxwell Technologies to report revenue of $39.55 million on a loss of 10 cents per share.

The current short interest as a percentage of the float for Maxwell Technologies is very high at 16.2%. That means that out of 27.57 million shares in the tradable float, 4.46 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 9.9%, or by 402,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of MXWL could easily trend sharply higher post-earnings as the shorts rush to cover some of their positions.

From a technical perspective, MXWL 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 few weeks, with shares moving higher from its low of $7.06 to its recent high of $10 a share. During that uptrend, shares of MXWL have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of MXWL within range of triggering a big breakout trade post-earnings.

If you're bullish on MXWL, 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 $10 to $10.67 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 660,266 shares. If that breakout materializes post-earnings, then MXWL will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $11.99 to $13.41 a share.

I would simply avoid MXWL or look for short-biased trades if after earnings it fails to trigger that breakout and then takes out its 50-day moving average of $9.12 a share with high volume. If we get that move, then MXWL will set up to re-test or possibly take out its next major support levels at $8 to $7.06 a share.

Cerner

My final earnings short-squeeze play is healthcare information services player Cerner (CERN) - Get Report , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Cerner to report revenue of $855.61 million on earnings of 42 cents per share.

The current short interest as a percentage of the float for Cerner is notable at 5%. That means that out of the 301.51 million shares in the tradable float, 15.18 million shares are sold short by the bears. This isn't a large short interest, but it's more than enough to spark a solid short-covering rally post-earnings if the bears get the earnings news they're looking for.

From a technical perspective, CERN is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock recently started to bounce off its 200-day moving average of $55.68 a share and it's now trending back above its 50-day moving average of $58.02 a share. That move is quickly pushing shares of CERN within range of triggering a big breakout trade post-earnings above some key overhead resistance levels.

If you're in the bull camp on CERN, 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 $60.38 a share to its 52-week high at $63.07 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 1.72 million shares. If that breakout develops post-earnings, then CERN will set up to enter new 52-week-high territory above $63.07, which is bullish technical price action. Some possible upside targets off that move are $70 to $75 a share.

I would avoid CERN 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 $58.02 a share to more near-term support at $57 a share with high volume. If we get that move, then CERN will set up to re-test or possibly take out its next major support levels at its 200-day moving average of $55.68 a share to $55.75 a share. If those levels get taken out with volume post-earnings, then CERN could trend lower towards $53 to $50 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.

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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.