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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.

Fitbit

My first earnings short-squeeze trade idea is wearable fitness-tracking device player Fitbit (FIT) - Get Fitbit, Inc. Class A Report , which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect Fitbit to report revenue of $647.82 million on earnings of 25 cents per share.

The current short interest as a percentage of the float for Fitbit is extremely high at 58%. That means that out of the 53.75 million shares in the tradable float, 31.88 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 4.8%, or by about 1.44 million 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 rush to cover some of their trades.

From a technical perspective, Fitbit is currently trending below its 50-day moving average and just above its 20-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 $12.90 to its intraday high on Monday of $16.54 a share. During that uptrend, shares of Fitbit 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 major breakout trade post-earnings.

If you're bullish on Fitbit, 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 $17.25 to around $18 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 6.40 million 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 $19.34 to its 50-day moving average of $21.41, or even $23 a share.

I would simply avoid Fitbit 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 $15 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 $12.90 a share.

Mobileye

Another potential earnings short-squeeze trading opportunity is application software player Mobileye (MBLY) , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Mobileye to report revenue $70.89 million on earnings of 14 cents per share.

The current short interest as a percentage of the float for Mobileye is very high at 22.5%. That means that out of the 169.27l million shares in the tradable float, 38.15 million shares are sold short by the bears. If this company can deliver the earnings news the bulls are looking for, then shares of Mobileye could easily spike sharply higher post-earnings as the bears move fast cover some of their positions.

From a technical perspective, Mobileye 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 higher off its low of $23.57 to its intraday high on Monday of $29.72 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 Mobileye within range of triggering a big breakout trade post-earnings.

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If you're in the bull camp on Mobileye, 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 $30 to $30.67 a share with high volume. Look for volume on that move that registers 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 its 50-day moving average of $33.64 to $37.50, or even $40 a share.

I would simply avoid Mobileye 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 $27.02 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 to its new 52-week low of $23.57 a share.

Lending Tree

Another potential earnings short-squeeze candidate is online loan marketplace operator Lending Tree (TREE) - Get LendingTree, Inc. Report , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Lending Tree to report revenue of $77.15 million on earnings of 72 cents per share.

The current short interest as a percentage of the float for Lending Tree is very high at 28.4%. That means that out of the 7.04 million shares in the tradable float, 2 million shares are sold short by the bears.

From a technical perspective, Lending Tree is currently trending below both its 50-day and 20-day moving averages, which is bearish. This stock has been uptrending a bit over the last few weeks, with shares moving higher off its recent low of $52.11 to its intraday high on Monday of $67.71 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 Lending Tree within range of triggering a big breakout trade post-earnings.

If you're bullish on Lending Tree, 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 around $70 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 687,334 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 $75 to its 50-day moving average of $77.34, or even its 200-day moving average of $89.28 a share.

I would avoid Lending Tree 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 20-day moving average of $64.78 to $60 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 $55 to $52.11 a share.

Weight Watchers International

Another earnings short-squeeze prospect is weight management services player Weight Watchers International (WTW) - Get Weight Watchers International, Inc. Report , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Weight Watchers International to report revenue of $257.21 million on earnings of 2 cents per share.

The current short interest as a percentage of the float for Weight Watchers International is extremely high at 59%. That means that out of 27.58 million shares in the tradable float, 16.29 million shares are sold short by the bear.

From a technical perspective, Weight Watchers International 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 over the last month or so, with shares moving higher off its low of $10.03 to its recent high of $15.29 a share. During that uptrend, shares of Weight Watchers 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 Weight Watchers International, 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 $15.29 to $16 a share and then once it clears its 50-day moving average of $16.14 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 3.95 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 $20 to $22 a share.

I would simply avoid Weight Watchers International 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 around $12.50 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 levels at its 20-day moving average of $11.95 to its 200-day moving average of $11.14, or even $10 a share.

Foundation Medicine

My final earnings short-squeeze play is health care player Foundation Medicine (FMI) - Get Foundation Medicine, Inc. Report , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Foundation Medicine to report revenue of $25.76 million on a loss of 67 cents per share.

The current short interest as a percentage of the float for Foundation Medicine is very high at 22.5%. That means that out of the 12.99 million shares in the tradable float, 2.92 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 5.9%, or by about 161,000 shares. If the bears get caught pressing their bets into a strong 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, Foundation Medicine 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, after shares found some buying interest at $13.42 to $13.34 a share. Following that bottom, this stock has started to rip higher and trend back above its 20-day moving average of $14.54 a share. That move has now pushed shares of Foundation Medicine within range of triggering a near-term breakout trade post-earnings.

If you're in the bull camp on Foundation Medicine, 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 $15.77 to $16 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 289,018 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 its 50-day moving average of $16.96 to $17.71, or even $18 to $20 a share.

I would avoid Foundation Medicine 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 $14.54 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 $13.34 a share.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.