DELAFIELD, Wis. (Stockpickr) -- U.S.-based stocks remained under heavy selling pressure Friday, as the Dow Jones Industrial Average plunged over 145 points and the S&P 500 trended down by over 12 points, taking out all of the gains for the year for both major U.S. indices. Part of those losses can be attributed to the strong U.S. dollar, which hit a 12-year high against the euro on Friday. A strong dollar is seen as a major tailwind for U.S. multinationals who do a large part of their business overseas.

Investors continue to shoot first and ask questions later, as they take risk off the table in front of the Federal Reserve's key two-day policy meeting set to kick off on Tuesday. The concern among many investors is that the Fed will hint at raising interest rates, which many economists are predicting will occur in mid-2015.

But there are still plenty of trading opportunities -- especially if you can catch a ride on a heavily shorted stock ahead of a strong earnings report. 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 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.

ExOne

My first earnings short-squeeze trading opportunity is 3D printing machines and printing products stock ExOne (XONE) - Get Report, which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect ExOne to report revenue of $18.54 million on a loss of 5 cents per share.

The current short interest as a percentage of the float for ExOne is extremely high at 39%. That means that out of the 9.38 million shares in the tradable float, 3.66 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 set off a large short-covering rally for shares of XONE post-earnings as the bears get potentially forced into covering some of their positions.

From a technical perspective, XONE 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 bottoming chart pattern over the last two months, with shares finding buying interest at $13.67, $13.40 and $13.90 a share. Shares of XONE have now started to spike higher off those support levels and it's beginning to move within range of triggering a major breakout trade above some key near-term overhead resistance levels post-earnings.

If you're bullish on XONE, 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 $17 to $17.79 a share and then above $17.92 to $18.36 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 331,641 shares. If that breakout triggers post-earnings, then shares of XONE will set up to re-test or possibly take out its next major overhead resistance levels $22 to its 200-day moving average of $23.52 a share.

I would simply avoid XONE 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 $13.90 a share to its all-time low of $13.40 a share with high volume. If we get that move, then XONE will set up to enter new all-time-low territory below $13.40, which is bearish technical price action. Some possible downside targets off that move are $12 to $10 a share.

MagicJack VocalTec

Another potential earnings short-squeeze play is cloud-based communications player MagicJack VocalTec (CALL) - Get Report, which is set to release its numbers on Monday after the market close. Wall Street analysts, on average, expect MagicJack VocalTec to report revenue $27.12 million on earnings of 12 cents per share.

The current short interest as a percentage of the float for MagicJack VocalTec is extremely high at 23.7%. That means that out of the 13.79 million shares in the tradable float, 3.26 million shares are sold short by the bears. This is a large short interest on a stock with a very low tradable float. If this company can deliver the earnings news the bulls are looking for, then shares of CALL could easily rip sharply higher post-earnings as the bears rush to cover some of their trades.

From a technical perspective, CALL is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock recently formed a major bottoming chart pattern, after shares found buying interest over the last two months at $6.97, $6.87 and $7.13 a share. Following that bottom, shares of CALL have started to rip higher right above those support levels and back above its 50-day moving average. That move has now pushed shares of CALL within range of triggering a major breakout trade post-earnings above some key overhead resistance levels.

If you're in the bull camp on CALL, 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 $8.46 to $8.67 and then above more resistance at $8.77 to $9.05 a share with high volume. Look for volume on that move that hits near or above its three-month average volume 209,151 shares. If that breakout begins post-earnings, then CALL will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $10.38 a share to $10.62 a share.

I would simply avoid CALL 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 $7.13 to its 52-week low of $6.87 a share with high volume. If we get that move, then CALL will set up to enter new 52-week-low territory, which is bearish technical price action. Some possible downside targets off that move are $5.50 to $5 a share.

Qunar Cayman Islands

Another potential earnings short-squeeze candidate is Chinese search-based commerce platform for the travel industry, Qunar Cayman Islands (QUNR) , which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect Qunar Cayman Islands to report revenue of $79.45 million on a loss of 45 cents per share.

The current short interest as a percentage of the float for Qunar Cayman Islands is pretty high at 11.7%. That means that out of the 37.20 million shares in the tradable float, 4.37 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 14%, or by about 537,000 shares. If the bears get caught pressing their bets into a bullish quarter, then shares of QUNR could easily rip sharply higher post-earnings as the bears scramble to cover some of their positions.

From a technical perspective, QUNR 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 trending sideways for the last two months, with shares moving between $26.40 on the downside and $30.55 on the upside. Shares of QUNR have now started to spike higher off the lower-end of its recent range and back above its 200-day moving average. That move is starting to push shares of QUNR within range off triggering a big breakout trade above the upper-end of its recent sideways trending chart pattern post-earnings.

If you're bullish on QUNR, 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 $29.36 to $29.50 a share and then above more resistance at $30.55 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 586,630 shares. If that breakout gets started post-earnings, then QUNR will set up to re-test or possibly take out its next major overhead resistance levels at its 52-week high of $33.70 a share to its all-time high of $36.73 a share. Any high-volume move above those levels will then give QUNR a chance to tag or take out $40 a share.

I would avoid QUNR 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 $27.46 to $26.85 a share and then below $26.40 to $25.90 a share with high volume. If we get that move, then QUNR will set up to re-test or possibly take out its next major support levels at $23.56 to its all-time low of $21 a share.

Papa Murphy's

Another earnings short-squeeze prospect is quick service restaurant franchisor and operator Papa Murphy's (FRSH) - Get Report, which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Papa Murphy's to report revenue of $26.43 million on earnings of 18 cents per share.

The current short interest as a percentage of the float for Papa Murphy's is extremely high at 28.7%. That means that out of 8.09 million shares in the tradable float, 2.32 million shares are sold short by the bears. This is a large short interest on a stock with a very low tradable float. If the bulls get the earnings news they're looking for, then shares of FRSH could easily rip sharply higher post-earnings as the bears rush to cover some of their trades.

From a technical perspective, FRSH is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending incredibly strong over the last five months, with shares moving higher from its low of $8.68 to its recent high of $14.32 a share. During that uptrend, shares of FRSH have been consistently making higher lows and higher highs which is bullish technical price action. That move has now pushed shares of FRSH within range of triggering a big breakout trade post-earnings above some key near-term overhead resistance levels.

If you're bullish on FRSH, 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 $13.94 to $14.10 a share and then above its all-time high of $14.32 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 105,956 shares. If that breakout develops post-earnings, then FRSH will set up to enter new all-time-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $17 to $18 a share.

I would simply avoid FRSH 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 $13.07 to $12.90 a share and then below its 50-day moving average of $12.88 a share with high volume. If we get that move, then FRSH will set up re-test or possibly take out its next major support levels at $11 to $10.60 a share, or even its 200-day moving average of $10.32 a share.

BioDelivery Sciences

My final earnings short-squeeze play is specialty pharmaceutical player BioDelivery Sciences (BDSI) - Get Report, which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect BioDelivery Sciences to report revenue of $4 million on a loss of 33 cents per share.

The current short interest as a percentage of the float for BioDelivery Sciences is very high at 13.3%. That means that out of the 49.02 million shares in the tradable float, 6.51 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 10.1%, or by about 598,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of BDSI could easily surge sharply higher post-earnings as the shorts scramble to cover some of their trades.

From a technical perspective, BDSI is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong over the last three months, with shares moving higher from its low of $11.49 to its recent high of $15.49 a share. During that uptrend, shares of BDSI have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of BDSI within range of triggering a breakout trade post-earnings above some key overhead resistance levels.

If you're in the bull camp on BDSI, 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 $15.49 to $15.94 a share and then above some past resistance at $16.57 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 810,566 shares. If that breakout materializes post-earnings, then BDSI will set up to re-test or possibly take out its 52-week high of $18.48 a share. Any high-volume move above that level will then give BDSI a chance to trend north towards $20 a share.

I would avoid BDSI or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below both its 200-day moving average of $14.13 to its 50-day moving average of $13.58 a share with high volume. If we get that move, then BDSI will set up to re-test or possibly take out its next major support levels at $12.58 to $11.49 a share.

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