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.

Enova International

My first earnings short-squeeze play is credit services player Enova International(ENVA) - Get Report , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Enova International to report revenue $171.06 million on earnings of 9 cents per share.

The current short interest as a percentage of the float for Enova International is rather high at 9.1%. That means that out of the 23.18 million shares in the tradable float, 2.12 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 22.2%, or by about 386,000 shares. If the bears get caught pressing their bets into a bullish quarter, then this stock could easily spike sharply higher post-earnings as the bears scramble to cover some of their positions.

From a technical perspective, Enova International 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 three months and change, with shares collapsing off its high of $13.66 to its recent low of $4.64 a share. During that downtrend, shares of Enova International have been making mostly lower highs and lower lows, which is bearish technical price action. That said, this stock has now started to rebound off that $4.65 low, and it's quickly moving within range of triggering a near-term breakout trade.

If you're bullish on Enova International, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 20-day moving average of $5.69 a share and then above some more key resistance levels at $5.84 to $6.02 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 403,208 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 its 50-day moving average of $6.38 to $6.85, or even $7.50 to $7.80 a share

I would simply avoid Enova International or look for short-biased trades after earnings if it fails to trigger that breakout and then drops back below some key near-term support levels at $5.19 to its new 52-week low of $4.64 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.

Outerwall

Another potential earnings short-squeeze trade idea is automated retail solutions provider Outerwall (OUTR) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Outerwall to report revenue $513.19 million on earnings of 64 cents per share.

The current short interest as a percentage of the float for Outerwall is extremely high at 62%. That means that out of the 14.34 million shares in the tradable float, 8.89 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 7.8%, or by about 641,000 shares. If the bears get caught pressing their bets into a strong 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, Outerwall 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 $29.29 to its intraday high on Monday of $34.29 a share. During that uptrend, shares of Outerwall have been consistently making higher lows and higher highs, which is bullish technical price action.

If you're in the bull camp on Outerwall, 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 $35 to $37.50 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 642,595 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 $39.50 to $42, or even its 50-day moving average of $42.75 a share.

I would simply avoid Outerwall 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 $32.67 a share and then below its new 52-week low of $28.85 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.

Ubiquiti Networks

Another potential earnings short-squeeze candidate is wireless communications player Ubiquiti Networks (UBNT) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Ubiquiti Networks to report revenue of $155.08 million on earnings of 51 cents per share.

The current short interest as a percentage of the float for Ubiquiti Networks is very high at 36.3%. That means that out of the 27.30 million shares in the tradable float, 9.91 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 7.2%, or by about 664,000 shares. If the bears get caught pressing their bets into a bullish quarter, then this stock could easily explode sharply higher post-earnings as the bears run to cover some of their trades.

From a technical perspective, Ubiquiti Networks 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 notably higher off its low of $25.75 to its recent high of $30.53 a share. During that uptrend, shares of Ubiquiti Networks 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 near-term breakout trade post-earnings.

If you're bullish on Ubiquiti Networks, 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 $29.62 to $30.53 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 480,871 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 its 50-day moving average of $31.54 to its 200-day moving average of $32.22, or even 34 to $35.50 a share.

I would avoid Ubiquiti Networks 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 $28.15 to $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 $25.75 to its 52-week low of $25.50 a share.

Deckers Outdoor

Another earnings short-squeeze prospect is consumer goods player Deckers Outdoor(DECK) - Get Report , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Deckers Outdoor to report revenue of $834.82 million on earnings of $4.79 per share.

The current short interest as a percentage of the float for Deckers Outdoor is very high at 23.1%. That means that out of 30.12 million shares in the tradable float, 6.97 million shares are sold short by the bear. If the bulls get the earnings news they're looking for, then shares of Deckers Outdoor could easily rip sharply higher post-earnings as the bears move fast to cover some of their positions.

From a technical perspective, Deckers Outdoor is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock has been uptrending over the last few weeks, with shares moving higher off its low of $40.74 to its recent high of $49.97 a share. During that uptrend, shares of Deckers Outdoor have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of Deckers Outdoor within range of triggering a big breakout trade post-earnings.

If you're bullish on Deckers Outdoor, 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 $50 to $51.93 a share and then above more resistance at $52.49 to $53.43 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 1.13 million shares. If that breakout takes hold post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $58 to $60, or even its 200-day moving average of $62.08 a share.

I would simply avoid Deckers Outdoor 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 50-day moving average of $48.02 to its 20-day moving average of $45.51 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 $40.74 a share.

Proto Labs

My final earnings short-squeeze trading opportunity is industrial goods player Proto Labs(PRLB) - Get Report , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Proto Labs to report revenue of $71.90 million on earnings of 47 cents per share.

The current short interest as a percentage of the float for Proto Labs is very high at 22.9%. That means that out of the 23.54 million shares in the tradable float, 5.40 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period b 2.1%, or by about 112,000 shares. If the bears get caught pressing their bets into a bullish quarter, then this stock could easily rip sharply higher post-earnings as the bears jump to cover some of their positions.

From a technical perspective, Proto Labs 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 and change, with shares falling off its high of $68.45 to its recent low of $52 a share. During that downtrend, shares of Proto Labs have been making mostly lower highs and lower lows, which is bearish technical price action. That said, this stock has now started to bounce higher off that $52 low, and it's quickly moving within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on Proto Labs, 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 $57.30 a share to its 20-day moving average of $57.36 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 181,597 shares. If that breakout gets underway post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $60 to its 50-day moving average of $61.83, or even $64 to its 200-day moving average of $67.365 a share.

I would avoid Proto Labs 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 $52 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.

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