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 very bullish technically 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.

Acacia Communications

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My first earnings short-squeeze trade idea is technology player Acacia Communications (ACIA) - Get Report , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Acacia Communications to report revenue of $139.72 million on earnings of 90 cents per share.

The current short interest as a percentage of the float for Acacia Communications is extremely high at 39.7%. That means that out of the 14.29 million shares in the tradable float, 5.68 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 24.8%, or by about 1.13 million shares. If the bears get caught pressing their bets into a strong quarter, then this stock could easily rip sharply higher post-earnings as the bears scramble to cover some of their positions.

From a technical perspective, Acacia Communications is currently trending above both its 20-day and 50-day moving averages, which is bullish. This stock has been uptrending over the last few weeks, with shares moving higher off its low of $54.25 a share to its intraday high on Tuesday of $69.50 a share. During that move, this stock has been consistently making higher lows and higher highs, which is bullish technical price action.

If you're bullish on Acacia Communications, 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 $70 to around $72.50 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 1.25 million shares. If that breakout hits post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $74.75 to $79, or even $85 to $90 a share.

I would simply avoid Acacia Communications or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below both its 50-day moving average of $62.53 a share and its 20-day moving average of $60.57 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its next major support levels at $55 to $54.25, or even $50 a share.

Fitbit

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Another potential earnings short-squeeze play is fitness tracking devices player Fitbit (FIT) - Get Report , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Fitbit to report revenue of $576.04 million on a loss of 50 cents per share.

The current short interest as a percentage of the float for Fitbit is extremely high at 37.2%. That means that out of the 139.91 million shares in the tradable float, 52.07 million shares are sold short by the bears.

From a technical perspective, Fitbit is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been trending sideways and consolidating over the last month, with shares moving between $5.62 on the downside and $6.19 on the upside. Any high-volume move above the upper-end of that recent sideways trending chart pattern post-earnings could trigger a big breakout trade for shares of Fitbit.

If you're in the bull camp on Fitbit, 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 $6.13 to $6.19 a share and then above its 20-day moving average of $6.21 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 11.07 million shares. If that breakout hits post-earnings, then this stock will set up to re-fill some of its previous gap-down-day zone that started near $7.50 a share. Any high-volume move above $7.50 will then give this stock a chance to tag $8 to $8.50 a share.

I would simply avoid Fitbit 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 $5.62 a share with high volume. If we get that move, then this stock will set up to enter new 52-week-low territory, which is bearish technical price action.

Mobileye

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Another potential earnings short-squeeze candidate is technology player Mobileye (MBLY) , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Mobileye to report revenue of $727.61 million on earnings of $2.00 per share.

The current short interest as a percentage of the float for Mobileye is very high at 16.1%. That means that out of the 178.25 million shares in the tradable float, 28.80 million shares are sold short by the bears.

From a technical perspective, Mobileye 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 and change, with shares moving higher off is low of $33.69 a share to its recent high of $47.22 a share. During that uptrend, shares of Mobileye have been consistently making higher lows and higher highs, which is bullish technical price action.

If you're bullish on Mobileye, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some key resistance levels at $47.22 to its 52-week high of $51.15 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 3.29 million shares. If that breakout triggers post-earnings, then this stock will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $55 to $60, or even $65 a share.

I would avoid Mobileye or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below both its 20-day moving average of $43.84 a share to more support at $43 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its next major support levels at its 50-day moving average of $40.66 a share to $39.50, or even $36 a share.

Zoe's Kitchen

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Another earnings short-squeeze prospect is fast-casual restaurants operator Zoe's Kitchen (ZOES) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Zoe's Kitchen to report revenue of $62.67 million on a loss of 6 cents per share.

The current short interest as a percentage of the float for Zoe's Kitchen is extremely high at 36.6%. That means that out of 19.18 million shares in the tradable float, 7.03 million shares are sold short by the bear.

From a technical perspective, Zoe's Kitchen is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently formed a double bottom chart pattern, after shares found some buying interest at $21 to $20.90 a share over the last two months. Following that potential bottom, this stock has started to uptrend and move back above its 20-day moving average of $22.35 a share.

If you're bullish on Zoe's Kitchen, 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 $23.59 a share to $23.65 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 454,532 shares. If that breakout hits post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $25.92 to $27.41, or even its 200-day moving average of $28.68 a share.

I would simply avoid Zoe's Kitchen or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 20-day moving average of $22.35 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out those recent double bottom support levels or its 52-week low of $20.20 a share.

J.C. Penney

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My final earnings short-squeeze trading opportunity is department stores operator J.C. Penney (JCP) - Get Report , which is set to release numbers on Friday before the market open. Wall Street analysts, on average, expect J.C. Penney to report revenue of $3.98 billion on earnings of 61 cents per share.

The current short interest as a percentage of the float for J.C. Penney is very high at 24.2%. That means that out of the 290.95 million shares in the tradable float, 70.63 million shares are sold short by the bears.

From a technical perspective, J.C. Penney 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 off its low of $6.35 a share to its recent high of $7.40 a share. During that uptrend, shares of J.C. Penney have been making mostly higher lows and higher highs, which is bullish technical price action.

If you're in the bull camp on J.C. Penney 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 $7.40 to its 50-day moving average of $7.68 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 19.17 million shares. If that breakout develops post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $8.25 to its 200-day moving average of $8.67 a share, or even $9.20 a share.

I would avoid J.C. Penney look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below some near-term support at $6.90 to its 20-day moving average of $6.87 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its next major support levels at its 52-week low of $6.35 a share to $6, or even $5.90 to $5.50 a share.

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