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.

Short-squeeze candidates are something that I tweet about on a regular basis. These are also the exact type of stocks that I love to trade and alert to my subscribers in real-time.

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.

Natural Health Trends

Image placeholder title

My first earnings short-squeeze trade idea is personal care products player Natural Health Trends (NHTC) - Get Report , which is set to release numbers on Wednesday before the market open. There are currently no Wall Street analysts' estimates available for Natural Health Trends.

The current short interest as a percentage of the float for Natural Health Trends is extremely high at 44.7%. That means that out of the 7.50 million shares in the tradable float, 3.35 million shares are sold short by the bears.

From a technical perspective, Natural Health Trends is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending a bit over the last two months, with shares moving higher off its low of $26.70 a share to its recent high of $38.50 a share. During that uptrend, shares of Natural Health Trends have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed this stock within range of triggering a major breakout trade above some key near-term overhead resistance levels post-earnings.

If you're bullish on Natural Health Trends, 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 $38.50 to $39.78 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 342,773 shares. If that breakout triggers post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $45 to $47.50, or even $50 a share.

I would simply avoid Natural Health Trends or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some near-term support levels at $33.74 a share to its 50-day moving average of $32.82 a share. If we get that move, then this stock will set up to re-test or possibly take out its next major support levels at $31.18 to $30 a share, or even $26.70 to around $24 a share.

Insys Therapeutics

Image placeholder title

Another potential earnings short-squeeze play is specialty pharmaceutical player Insys Therapeutics (INSY) , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Insys Therapeutics to report revenue $61.31 million on earnings of 7 cents per share.

The current short interest as a percentage of the float for INSYS Therapeutics is extremely high at 78.3%. That means that out of the 23.97 million shares in the tradable float, 18.66 million shares are sold short by the bears. This is a huge short-interest on a stock with a very low tradable float. Any bullish earnings news could easily set off a monster short-squeeze for shares of Insys Therapeutics post-earnings that forces the bears to cover some of their positions.

From a technical perspective, Insys Therapeutics 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 few weeks, with shares moving higher off its low of $12.50 a share to its recent high of $16.28 a share. During that uptrend, shares of Insys Therapeutics have been consistently making higher lows and higher highs, which is bullish technical price action.

If you're in the bull camp on Insys Therapeutics, 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 $16.79 a share and then above more key resistance levels at $18 to $18.65 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 893,190 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 $20.98 to $21.22, or even $23 to $24 a share.

I would simply avoid Insys Therapeutics or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some near-term support levels at $15 to $14 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 level at its new 52-week low of $12.50 a share.

Innoviva

Image placeholder title

Another potential earnings short-squeeze candidate is health care player Innoviva (INVA) - Get Report , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Innoviva to report revenue of $26.61 million on earnings of 9 cents per share.

The current short interest as a percentage of the float for Innoviva is extremely high at 43.9%. That means that out of the 58.50 million shares in the tradable float, 25.73 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of Innoviva could easily rip sharply higher post-earnings as the bears scramble to cover some of their positions.

From a technical perspective, Innoviva 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 four months, with shares moving higher off its low of $7.90 a share to its recent high of $14.15 a share. During that uptrend, shares of Innoviva have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed this stock within range of triggering a big breakout trade post-earnings.

If you're bullish on Innoviva, 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 $14.15 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 719,454 shares. If that breakout kicks off post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $16.36 to $18, or even $19.65 to $20.28 a share.

I would avoid Innoviva 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 $13.25 a share to its 50-day moving average of $12.45 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 200-day moving average of $11.24 to $10.84 a share.

Carbo Ceramics

Image placeholder title

Another earnings short-squeeze prospect is oilfield services technology player Carbo Ceramics (CRR) - Get Report , which is set to release numbers on Thursday before the market opens. Wall Street analysts, on average, expect Acacia Research to report revenue of $38.51 million on a loss of 89 cents per share.

The current short interest as a percentage of the float for CARBO Ceramics is very high at 52.4%. That means that out of 16.01 million shares in the tradable float, 8.39 million shares are sold short by the bear.

From a technical perspective, Carbo Ceramics is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending over the last few weeks, with shares moving higher off its recent low of $13.35 a share to its recent high of $17.07 a share. During that uptrend, shares of Carbo Ceramics have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed this stock within range of triggering a big breakout trade post-earnings.

If you're bullish on Carbo Ceramics, 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 $17.03 a share to some more key resistance at $17.07 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 674,452 shares. If that breakout fires off post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $19 to $20, or even its 200-day moving average of $20.62 a share.

I would simply avoid Carbo Ceramics 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 $15.10 a share to some more near-term support at $14.57 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 $13.35 to its new 52-week low of $13.21 a share. Any high-volume move below $13.21 a share will then push this stock into new 52-week-low territory, which is bearish technical price action.

IRadimed

Image placeholder title

My final earnings short-squeeze trading opportunity is medical appliances and equipment player IRadimed (IRMD) - Get Report , which is set to release numbers on Friday before the market open. Wall Street analysts, on average, expect IRadimed to report revenue of $9.05 million on earnings of 18 cents per share.

The current short interest as a percentage of the float for IRadimed is very high at 21.9%. That means that out of the 4.36 million shares in the tradable float, 955,000 shares are sold short by the bears.

From a technical perspective, IRadimed 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 few weeks, with shares moving higher off its new 52-week low of $14.05 a share to its recent high of $16.21 a share. During that uptrend, shares of IRadimed have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed this stock within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on IRadimed, 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 its 20-day moving average of $16.19 a share to its 50-day moving average of $17.25 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 94,541 shares. If that breakout triggers post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $18 to $20.12, or even $21 to around $23 a share.

I would avoid IRadimed 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 $15 to its new 52-week low of $14.05 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.

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