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 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.

Analogic

My first earnings short-squeeze trade idea is health care technology player Analogic (ALOG) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Analogic to report revenue of $150.53 million on earnings of $1.24 per share.

The current short interest as a percentage of the float for Analogic is notable at 7.8%. That means that out of the 12.33 million shares in the tradable float, 966,200 shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 8.3%, or by about 74,000 shares. If bears get caught pressing their bets into a strong quarter, then this stock could easily move strong to the upside post-earnings as the bears move fast to cover some of their trades.

From a technical perspective, Analogic is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last few weeks, with shares moving higher from its low of $76.87 to its recent high of $84.79 a share. During that uptrend, this stock has been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of Analogic within range of triggering a big breakout trade post-earnings.

If you're bullish on Analogic, 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 $84.79 to $85.14 a share and then above $86 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 94,786 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 $88 to $89, or even its 52-week high of $92.31 a share. Any high-volume move above its 52-week high will then give shares of Analogic a chance to tag $95 to $100 a share post-earnings.

I would simply avoid Analogic 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 its 200-day moving average of $83.38 and then below more near-term support at $82 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 $80.41 to around $77 to $76 a share.

Cracker Barrel Old Country Store

Another potential earnings short-squeeze play is restaurants player Cracker Barrel Old Country Store (CBRL) - Get Report , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Cracker Barrel Old Country Store to report revenue $724.29 million on earnings of $1.86 per share.

The current short interest as a percentage of the float for Cracker Barrel Old Country Store is extremely high at 22.3%. That means that out of the 18.98 million shares in the tradable float, 4.23 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 3.4%, or by around 140,000 shares. If bears get caught pressing their bets into a bullish quarter, then this stock could easily jump sharply higher post-earnings as the bears rush to cover some of their positions.

From a technical perspective, Cracker Barrel Old Country Store is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly over the last six months, with shares moving sharply lower from over $19 a share to its new all-time low of $9.21 a share. During that downtrend, shares of Vera Bradley have been consistently making lower highs and lower lows, which is bearish technical price action. That said, this stock has now started to bounce higher off that $9.21 low and it's beginning to move within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on Cracker Barrel Old Country Store, 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 $10.63 to its 50-day moving average of $10.97 and then above more key resistance at $11.07 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 379,719 shares. If that breakout gets started post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $11.97 to $13, or even $14 to $14.50 a share.

I would simply avoid Cracker Barrel Old Country Store 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 $10 to its all-time low of $9.21 a share with high volume. If we get that move, then this stock will set up to enter new all-time-low territory, which is bearish technical price action. Some possible downside targets off that move are $8 to $7.50 a share.

Zayo Group

Another potential earnings short-squeeze candidate is networking and communication devices player Zayo Group (ZAYO) - Get Report , which is set to release numbers on Friday before the market open. Wall Street analysts, on average, expect Zayo Group to report revenue of $361.96 million on earnings of 5 cents per share.

The current short interest as a percentage of the float for Zayo Group is notable at 5.3%. That means that out of the 70.73 million shares in the tradable float, 5.66 million shares are sold short by the bears. If this company can deliver the earnings news the bulls are looking for, then shares of Zayo Group could easily spike sharply higher post-earnings as the bears scramble to cover some of their positions.

From a technical perspective, Zayo Group is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last few weeks, with shares moving lower from its high of $25.45 to its recent high of $29.41 a share. During that uptrend, shares of Zayo Group 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 Zayo Group, 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 $29.41 to $29.62 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 1.05 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 $30.94 to its all-time high of $32.18 a share. Any high-volume move above $32.18 will then give this stock a chance to make a run at $35 to $40 a share.

I would avoid Zayo Group 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 $27.70 and its 50-day moving average of $26.98 a share and then below more key support at $26.80 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 $25.45 to $23.91 a share.

Ascena Retail Group

Another earnings short-squeeze prospect is specialty retailer Ascena Retail Group (ASNA) - Get Report , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Ascena Retail Group to report revenue of $1.16 billion on earnings of 5 cents per share.

The current short interest as a percentage of the float for Ascena Retail Group is rather high at 11.4%. That means that out of 138.37 million shares in the tradable float, 15.84 million shares are sold short by the bear. If the bulls get the earnings news they're looking for, then shares of Ascena Retail Group could easily rip sharply higher post-earnings as the bears move fast to cover some of their positions.

From a technical perspective, Ascena Retail Group is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been trending sideways over the last few weeks, with shares moving between $11.47 on the downside and $12.76 on the upside. Any high-volume move above the upper-end of its recent sideways trending chart pattern post-earnings could easily trigger a big breakout trade for shares of Ascena Retail Group.

If you're bullish on Ascena Retail Group, 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 $12.76 to $13.06 and then above its 200-day moving average of $13.52 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 4.05 million 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 level at around $14.50 a share. Any high-volume move above $14.50 will then give this stock a chance to re-fill some of its previous gap-down-day zone from July that started at $16.50 a share.

I would simply avoid Ascena Retail Group 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 $11.47 to its 52-week low of $10.50 a share with high volume. If we get that move, then this stock will set up to trend lower towards $9 to $8 a share.

Herman Miller

My final earnings short-squeeze trading opportunity is business equipment player Herman Miller (MLHR) - Get Report , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Herman Miller to report revenue of $554.35 million on earnings of 46 cents per share.

The current short interest as a percentage of the float for Herman Miller stands at 2.9%. That means that out of the 57.85 million shares in the tradable float, 1.68 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 16.9%, or by about 242,000 shares. If bears get caught pressing their bets into a strong quarter, then this stock could easily rip sharply higher post-earnings as the bears run to cover some of their trades.

From a technical perspective, Herman Miller 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 at $26.38 to $26.27 a share. Following that bottom, shares of Herman Miller have started to spike higher and it's quickly moving within range of triggering a major breakout trade that could hit post-earnings.

If you're in the bull camp on Herman Miller, 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 $27.88 to its 50-day at $27.94 and then above its 200-day moving average of $28.51 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 401,978 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 $29.57 to $30.50, or even $31.80 to its 52-week high of $32.35 a share.

I would avoid Herman Miller 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 $26.50 to $26.27 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 $25.38 to $24, or even $23 to $22 a share.

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