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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.

Pilgrim's Pride

My first earnings short-squeeze play is major diversified food player Pilgrim's Pride (PPC) - Get Free Report , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Pilgrim's Pride to report revenue of $1.99 billion on earnings of 40 cents per share.

The current short interest as a percentage of the float for Pilgrim's Pride is extremely high at 53.3%. That means that out of the 59.07 million shares in the tradable float, 31.53 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of Pilgrim's Pride could easily spike sharply higher post-earnings as the bears move fast to cover some of their positions.

From a technical perspective, Pilgrim's Pride 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 three months and change, with shares moving higher from its low $17.39 to its recent high of $24.13 a share. During that uptrend, shares of Pilgrim's Pride 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 Pilgrim's Pride, 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 $23.10 to $24.13 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 1.99 million 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 $26 to $27.35, or even its 52-week high of $28.79 a share.

I would simply avoid Pilgrim's Pride or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 50-day moving average of $22.02 a share and then below some more key support at $20.41 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 $18.50 to $17.39 a share.

Quotient Technology

Another potential earnings short-squeeze trading opportunity is digital promotion platform operator Quotient Technology (QUOT) - Get Free Report , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Quotient Technology to report revenue $59.80 million on a loss of 3 cents per share.

The current short interest as a percentage of the float for Quotient Technology is pretty high at 14.3%. That means that out of the 67.85 million shares in the tradable float, 9.73 million shares are sold short by the bears. If this company can deliver the earnings news the bulls are looking for, then shares of Quotient Technology could easily spike sharply higher post-earnings as the bears rush to cover some of their trades.

From a technical perspective, Quotient Technology is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been consolidating and trending sideways over the last month or so, with shares moving between $5 on the downside and $6.17 on the upside. Any high-volume move above the upper-end of its recent sideways trending chart pattern post-earnings could trigger a big breakout trade for shares of Quotient Technology.

If you're in the bull camp on Quotient Technology, 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 $6 to $6.12 a share and then above $6.17 to its 50-day moving average of $6.27 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 436,629 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 $7 to $7.50, or even $8 to $8.50 a share.

I would simply avoid Quotient Technology 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 its 52-week low of $5 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.

Mindbody

Another potential earnings short-squeeze candidate is cloud-based business management software and payments platform operator Mindbody (MB) - Get Free Report , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Mindbody to report revenue of $27.58 million on a loss of 20 cents per share.

The current short interest as a percentage of the float for Mindbody is very high at 13.8%. That means that out of the 13.95 million shares in the tradable float, 1.93 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 129,000 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 move fast to cover some of their positions.

From a technical perspective, Mindbody is currently trending below both its 50-day and 20-day moving averages, which is bearish. This stock has been downtrending badly over the last three months and change, with share falling sharply off its high of $18.39 to its recent low of $10.60 a share. During that downtrend, shares of Mindbody 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 $10.60 low, and its beginning to move within range of triggering a near-term breakout trade post-earnings.

If you're bullish on Mindbody, 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 $12.10 a share and then above more key resistance levels at $12.50 to $13 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 132,979 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 $14.29 to $16 a share.

I would avoid Mindbody 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 $10.60 to $9.90 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its all-time low of $9.14 a share.

IPG Photonics

Another earnings short-squeeze prospect is technology player IPG Photonics (IPGP) - Get Free Report , which is set to release numbers on Friday before the market open. Wall Street analysts, on average, expect IPG Photonics to report revenue of $223.84 million on earnings of $1.09 per share.

The current short interest as a percentage of the float for IPG Photonics is pretty high at 12.1%. That means that out of 44.33 million shares in the tradable float, 5.38 million shares are sold short by the bear. This stock sports a pretty high short interest with a relatively low tradable float. Any bullish earnings news could easily set of a large short-squeeze for shares of IPG Photonics post-earnings that sends the bears scrambling to cover some of their positions.

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 trending sideways over the last month or so, with shares moving between $76.64 on the downside and $84.47 on the upside. Any high-volume above the upper-end of its recent sideways trending chart pattern post-earnings could easily trigger a big breakout trade for shares of IPG Photonics.

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 key near-term overhead resistance levels at $84.04 to $84.47 a share and then above both its 50-day moving average of $85.75 a share to its 200-day moving average of $86.61 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 380,024 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 $93 to $95, or even $99 to $100 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 levels at $78 to $76.64 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its 52-week low of $70.21 a share.

Western Union

My final earnings short-squeeze play is money movement and payment services player Western Union (WU) - Get Free Report , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Western Union to report revenue of $1.40 billion on earnings of 42 cents per share.

The current short interest as a percentage of the float for Western Union is pretty high at 14.1%. That means that out of the 504.46 million shares in the tradable float, 71.45 million shares are sold short by the bears. If this company can deliver the earnings news the bulls are looking for, then shares of Western Union could easily rip sharply higher post-earnings as the bears run to cover some of their positions.

From a technical perspective, Western Union is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last three months and change, with shares falling off its high of $19.73 to its new 52-week low of $16.02 a share. During that downtrend, this stock has been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of Western Union have now started to spike higher off that $16.02 low, and it's beginning to move within range of triggering a near-term breakout trade post-earnings.

If you're in the bull camp on Western Union, 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 $17.78 to $17.82 a share and then above $18 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 4.31 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 $19 to its 200-day moving average of $19.08, or even $20 to around $22 a share.

I would avoid Western Union 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 $16.50 to its new 52-week low of $16.02 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.