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.

Blackhawk Network

My first earnings short-squeeze trade idea is credit services player Blackhawk Network (HAWK) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Blackhawk Network to report revenue of $196.31 million on earnings of 30 cents per share.

The current short interest as a percentage of the float for Blackhawk Network is extremely high at 10.1%. That means that out of the 13.82 million shares in the tradable float, 1.40 million shares are sold short by the bears.

From a technical perspective, Blackhawk Network is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last two months, with shares moving higher from its low of $37.87 to its recent high of $46.97 a share. During that uptrend, shares of Blackhawk Network have been consistently making 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 Blackhawk Network, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its all-time high of $46.97 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 533,765 shares. If that breakout triggers post-earnings, then this stock will set up to enter new all-time-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $55 to $60, or even $65 a share.

I would simply avoid Blackhawk Network 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 $44 to both its 20-day moving average of $43.17 and its 50-day moving average of $42.50 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 200-day moving average of $38.79 a share.

Lindsay

Another potential earnings short-squeeze play is farm and construction machinery player Lindsay(LNN) - Get Report , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Lindsay to report revenue $129.07 million on earnings of 55 cents per share.

The current short interest as a percentage of the float for Lindsay is extremely high at 33.2%. That means that out of the 11.13 million shares in the tradable float, 3.69 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of Lindsay could easily rip sharply higher post-earnings as the bears rush to cover some of their positions.

From a technical perspective, Lindsay 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 falling sharply lower off its high of $91.63 to its recent low of $64.99 a share. During that downtrend, shares of Lindsay 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 $64.99 low and it's quickly moving within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on Lindsay, 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 $72 to $73.07 and then above its 50-day moving average of $75.09 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 108,046 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 $77.34 to its 200-day moving average of $80.05, or even $82 to $85 a share.

I would simply avoid Lindsay 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 $68 to its 52-week low of $64.99 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.


Straight Path Communications

Another potential earnings short-squeeze candidate is diversified communications services player Straight Path Communications (STRP) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Straight Path Communications to report revenue of $2.80 million on earnings of 1 cent per share.

The current short interest as a percentage of the float for Straight Path Communications is extremely high at 27.2%. That means that out of the 10.75 million shares in the tradable float, 2.92 million shares are sold short by the bears.

From a technical perspective, Straight Path Communications 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 two months, with shares moving higher from its low of $21.03 to its recent high of $44.93 a share. During that uptrend, shares of Straight Path Communications 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 Straight Path Communications, 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 $42.26 to its all-time high of $44.93 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 189,182 shares. If that breakout develops post-earnings, then this stock will set up to enter new all-time-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $50 to $55, or even $60 to $65 a share.

I would avoid Straight Path Communications 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 $39.14 to $39.07 and then below more support at $36.98 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 $33.57 to its 50-day moving average of $30.76 a share.

MGIC Investment

Another earnings short-squeeze prospect is private mortgage insurance and ancillary services player MGIC Investment(MTG) - Get Report , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect MGIC Investment to report revenue of $250.69 million on earnings of 21 cents per share.

The current short interest as a percentage of the float for MGIC Investment is pretty high at 11.6%. That means that out of 335.66 million shares in the tradable float, 39.05 million shares are sold short by the bear.

From a technical perspective, MGIC Investment 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 from its low of $8.99 to its recent high of $9.93 a share. During that uptrend, shares of MGIC Investment 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 MGIC Investment, 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 $9.93 to its 200-day moving average of $10.12 and then above its 50-day moving average of $10.16 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 4.78 million 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 $10.45 to $10.63, or even $11 to $11.75 a share.

I would simply avoid MGIC Investment 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 $9.63 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 $8.99 to $8.50, or $8 to its 52-week low of $7.27 a share.

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Winnebago Industries

My final earnings short-squeeze trading opportunity is recreational vehicles player Winnebago Industries(WGO) - Get Report , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Winnebago Industries to report revenue of $262.17 million on earnings of 47 cents per share.

The current short interest as a percentage of the float for Winnebago Industries is very high at 19.3%. That means that out of the 26.55 million shares in the tradable float, 5.14 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 8.9%, or by about 420,000 shares. If the bears get caught pressing their bets into a bullish quarter, then this stock could easily soar sharply higher post-earnings as the bears scramble to cover some of their positions.

From a technical perspective, Winnebago Industries 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 from its low of $17.80 to its recent high of $20.83 a share. During that uptrend, this stock has been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of Winnebago Industries within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on Winnebago Industries, 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 $20.27 to $20.83 and then above its 200-day moving average of $21.18 to $21.33 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 309,014 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 $22.73 to $24, or even $24.63 to its 52-week high of $26.44 a share.

I would avoid Winnebago Industries 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 $19.64 to $19.71 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 $17.80 to $16.44, or even $14 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.