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.

Paychex

My first earnings short-squeeze trade idea is staffing and outsourcing services player Paychex (PAYX) - Get Report , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Paychex to report revenue of $717.52 million on earnings of 51 cents per share.

The current short interest as a percentage of the float for Paychex is notable at 6.6%. That means that out of the 332.63 million shares in the tradable float, 21.41 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 3.2%, or by about 644,000 shares. If the bears get caught pressing their bets into a bullish quarter, then this stock could easily surge sharply higher post-earnings as the bears move fast to cover some of their positions.

From a technical perspective, Paychex is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock has been uptrending over the last month or so, with shares moving higher from its low of $41.59 to its recent high of $47.09 a share. During that uptrend, shares of Paychex 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 Paychex, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 200-day moving average of $47.37 a share and then above more key resistance at $48.50 to $48.66 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 2.31 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 level at its 52-week high of $51.72 a share. Any high-volume move above that level will then give this stock a chance to make a run at $55 to $60 a share.

I would simply avoid Paychex 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 $46.30 and its 20-day moving average of $45.66 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 $43.19 to $41.50 a share.

Barracuda Networks

Another potential earnings short-squeeze play is security and storage solutions player Barracuda Networks (CUDA) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Barracuda Networks to report revenue $78.56 million on earnings of 9 cents per share.

The current short interest as a percentage of the float for Barracuda Networks is notable at 6.5%. That means that out of the 22.42 million shares in the tradable float, 1.46 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 5.1%, or by about 70,000 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, Barracuda Networks 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 $24.63 on the downside and $29.99 on the upside. Any high-volume move above the upper-end of its recent sideways trending chart pattern could trigger a big breakout trade for shares of Barracuda Networks post-earnings.

If you're in the bull camp on Barracuda 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 its 50-day moving average of $26.84 to its 20-day moving average of $27.06 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 582,266 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 $30 to $30.77 a share, or even just above $32 a share. Any high-volume move above $33 a share will then give this stock a chance to re-fill some of its previous gap-down-day zone from July that started at $40 a share.

I would simply avoid Barracuda 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 $24.73 to $24.63 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 level at its 52-week low of $21.85 a share.

Synnex

Another potential earnings short-squeeze candidate is business process services player Synnex (SNX) - Get Report , which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect Synnex to report revenue of $3.38 billion on earnings of $1.43 per share.

The current short interest as a percentage of the float for Synnex stands at 7.8%. That means that out of the 28.86 million shares in the tradable float, 2.26 million shares are sold short by the bears. If this company can deliver the earnings news the bulls are looking for, then shares of Synnex could easily rip sharply higher post-earnings as the bears run to cover some of their positions.

From a technical perspective, Synnex is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last three months, with shares moving higher from its low of $70.88 to its recent high of $86.86 a share. During that uptrend, shares of Synnex 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 Synnex, 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 $86 a share and then above its 52-week high of $86.86 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 235,467 shares. If that breakout hits post-earnings, then this stock will set up to enter new 52-week-high territory above $46.28, which is bullish technical price action. Some possible upside targets off that move are $95 to $100 a share.

I would avoid Synnex 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 $82.81 to 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 $78.93 to its 200-day moving average of $77.61 a share, or even $72.06 a share.

McCormick

Another earnings short-squeeze prospect is processed and packaged goods player McCormick (MKC) - Get Report , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect McCormick to report revenue of $1.06 billion on earnings of 87 cents per share.

The current short interest as a percentage of the float for McCormick is pretty high at 7.4%. That means that out of 123.84 million shares in the tradable float, 9.26 million shares are sold short by the bear. The bears have also been increasing their bets from the last reporting period by 8.6%, or by about 737,000 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 run to cover some of their trades.

From a technical perspective, McCormick is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last month and change, with shares moving higher from its low of $75.68 to its recent high of $84.44 a share. During that uptrend, shares of McCormick 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 McCormick, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some key overhead resistance levels at $84.44 a share to its 52-week high of $85.30 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 803,125 shares. If that breakout develops post-earnings, then this stock will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $95 to $100 a share.

I would simply avoid McCormick 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 its 50-day moving average of $81.56 to its 20-day moving average of $81.32 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 $78 to its 200-day moving average of $77.13, or even $75 a share.

AZZ

My final earnings short-squeeze trading opportunity is diversified machinery player AZZ (AZZ) - Get Report , which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect AZZ to report revenue of $217.86 million on earnings of 68 cents per share.

The current short interest as a percentage of the float for AZZ sits at 3.3%. That means that out of the 24.93 million shares in the tradable float, 824,000 shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 7.9%, or by about 60,000 shares. If the bears get caught pressing their bets into a strong quarter, then this stock could jump sharply higher post-earnings as the bears rush to cover some of their positions.

From a technical perspective, AZZ is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last few weeks, with shares moving lower off its high of $53.62 to its recent low of $49.74 a share. During that downtrend, shares of AZZ have been making mostly lower highs and lower lows, which is bearish technical price action.

If you're in the bull camp on AZZ, then I would wait until after its report and look for long-biased trades if this stock manages to break out above both its 20-day moving average of $51.13 and its 50-day moving average of $51.38 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 153,573 shares. If that breakout gets set off post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $53.75 to its 52-week high of $54.01 a share. Any high-volume move above those levels will then give this stock a chance to tag $60 to $65 a share.

I would avoid AZZ 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 $49 a share to its 200-day moving average of $47.75 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 $45 to $44 a share, or even $40 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.