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.

Buffalo Wild Wings

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My first earnings short-squeeze trade idea is restaurants operator Buffalo Wild Wings (BWLD) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Buffalo Wild Wings to report revenue of $429.87 million on earnings of $1.27 per share.

The current short interest as a percentage of the float for Buffalo Wild Wings is pretty high at 13.1%. That means that out of the 18.78 million shares in the tradable float, 2.46 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 12.1%, or by about 267,000 shares. If the shorts get caught pressing their bets too aggressively into a bullish quarter, then shares of Buffalo Wild Wings could easily explode sharply higher post-earnings as the bears move fast to cover some of their trades.

If you're bullish on Buffalo Wild Wings, 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 at $175 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 527,017 shares. If that breakout triggers post-earnings, then this stock will set up to re-fill some of its previous gap-down-day zone from April that started near $185 a share. If this stock takes out $185, then we could see Buffalo Wild Wings trend towards $190 to $195 a share.

I would simply avoid Buffalo Wild Wings or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back some key near-term support at $165 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 $159.99 to $155, or even $149 a share.

Novadaq Technologies

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Another potential earnings short-squeeze play is health care player Novadaq Technologiesundefined, which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Novadaq Technologies to report revenue $13.99 million on a loss of 17 cents per share.

The current short interest as a percentage of the float for Novadaq Technologies is pretty high at 13%. That means that out of the 50.91 million shares in the tradable float, 6.64 million shares are sold short by the bears. This stock sports a high short-interest and a reasonably low tradable float. If the bulls get the earnings news they're looking for, then shares of Novadaq Technologies could easily rip sharply higher post-earnings as the bears move fast to cover some of their trades.

From a technical perspective, Novadaq Technologies 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 two months, with shares moving higher from its low of $9.40 to its recent high of $13.45 a share. During that uptrend, shares of Novadaq Technologies have been making mostly higher lows and higher highs, which is bullish technical price action.

If you're in the bull camp on Novadaq Technologies, 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 $13 to $13.45 a share and then above its 200-day moving average of $13.61 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 450,065 shares. If that breakout gets set off post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $16 to $17.29 a share.

I would simply avoid Novadaq Technologies 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 $11.76 to its 50-day moving average of $11.42 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 $10 to $9.40 a share.

Aegerion Pharmaceuticals

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Another potential earnings short-squeeze candidate is biotechnology player Aegerion Pharmaceuticals (AEGR) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Aegerion Pharmaceuticals to report revenue of $56.94 million on a loss of 36 cents per share.

The current short interest as a percentage of the float for Aegerion Pharmaceuticals is extremely high at 41.2%. That means that out of the 16.11 million shares in the tradable float, 6.63 million shares are sold short by the bears. If this company can produce the earnings news the bulls are looking for, then shares of Aegerion Pharmaceuticals could easily spike sharply higher post-earnings as the bears scramble to cover some of their positions.

From a technical perspective, Aegerion Pharmaceuticals 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 five months, with shares moving lower from its high of $28.97 to its recent low of $16.68 a share. During that downtrend, shares of Aegerion Pharmaceuticals have been making mostly lower highs and lower lows, which is bearish technical price action.

If you're bullish on Aegerion Pharmaceuticals, 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 its 50-day moving average of $18.95 a share to more resistance at $19.14 to $19.15 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 578,003 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 $19.54 to $20.38, or even $21.21 to $23 a share.

I would avoid Aegerion Pharmaceuticals or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 52-week low of $16.68 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 $14 to $12.86 a share.

IPG Photonics

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Another earnings short-squeeze prospect is technology player IPG Photonics (IPGP) - Get IPG Photonics Corporation (IPGP) Report, which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect IPG Photonics to report revenue of $222.04 million on earnings of $1.11 per share.

The current short interest as a percentage of the float for IPG Photonics is very high at 12%. That means that out of 44.18 million shares in the tradable float, 5.31 million shares are sold short by the bear. The bears have also been increasing their bets from the last reporting period by 3.9%, or by about 197,000 shares. If the shorts get caught pressing their bets into a bullish quarter, then shares of IPG Photonics could easily explode sharply higher post-earnings as the bears move fast to cover some of their trades.

From a technical perspective, IPG Photonics is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last two months, with shares moving lower from its high of $98.81 to its recent low of $78.76 a share. During that move, this stock has been making mostly lower highs and lower lows, which is bearish technical price action.

If you're bullish on IPG Photonics, 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 $82.50 to its 200-day moving average of $84.09 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 414,148 shares. If that breakout materializes post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $86.11 to its 50-day moving average of $89.56, or even $92.50 a share.

I would simply avoid IPG Photonics 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 $77 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 $69.86 to $68.39, or even $65 to $60.75 a share.

AtriCure

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My final earnings short-squeeze trading opportunity is atrial fibrillation solutions provider AtriCure (ATRC) - Get AtriCure, Inc. Report, which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect AtriCure to report revenue of $30.51 million on a loss of 21 cents per share.

The current short interest as a percentage of the float for AtriCure stands at 13.7%. That means that out of the 24.85 million shares in the tradable float, 3.40 million shares are sold short by the bears. This is a decent short interest on a stock with a very low tradable float. Any bullish earnings news could easily spark a large short-squeeze for shares of AtriCure post-earnings that sends the bears running to cover some of their positions.

From a technical perspective, AtriCure 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 uptrending strong over the last six months, with shares moving higher from its low of $17.22 to its recent high of $25.36 a share. During that uptrend, this stock has been consistently making higher lows and higher highs, which is bullish technical price action.

If you're in the bull camp on AtriCure, 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 $25.30 to its 52-week high of $25.36 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 169,195 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 move are $30 to $35 a share.

I would avoid AtriCure 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 to $21 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 $20.19 to $18, or even $17.22 a share.

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