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.

Fastenal

One potential earnings short-squeeze play is industrial equipment wholesale player Fastenal(FAST) - Get Report , which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect Fastenal to report revenue $1.01 billion on earnings of 47 cents per share.

The current short interest as a percentage of the float for Fastenal is pretty high at 12.9%. That means that out of the 287.91 million shares in the tradable float, 37.21 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of Fastenal could easily spike sharply higher post-earnings as the bears rush to cover some of their trades.

From a technical perspective, Fastenal is currently trending below its 200-day moving average and above its 50-day moving average, which is neutral trendwise. This stock has been uptrending over the last few weeks, with shares moving higher from its low of $34.45 to its recent high of $39.39 a share. During that uptrend, shares of Fastenal have been making mostly higher lows and higher highs, which is bullish technical price action.

If you're in the bull camp on Fastenal, 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 $39.39 to $40.50 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 2.7 million 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 $42 to $43, or even $45 to $47.50 a share.

I would simply avoid Fastenal or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below both its 50-day moving average of $38.46 and its 20-day moving average of $37.31 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 $34.45 to around $30 a share.

Westamerica Bancorp

Another potential earnings short-squeeze candidate is regional banking player Westamerica Bancorp(WABC) - Get Report , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Westamerica Bancorp to report revenue of $48.49 million on earnings of 58 cents per share.

The current short interest as a percentage of the float for Westamerica Bancorp is pretty high at 12.8%. That means that out of the 24.45 million shares in the tradable float, 3.13 million shares are sold short by the bears. This stock sports a high short interest and a very low tradable float. Any bullish earnings news could easily set off a monster short-squeeze for shares of Westamerica Bancorp post-earnings that forces the bears to cover some of their trades.

From a technical perspective, Westamerica Bancorp 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 two months, with shares moving between $41.99 on the downside and $45.97 on the upside. Any high-volume move above the upper-end of its recent sideways trending chart pattern post-earnings could easily trigger a big breakout trade for shares of Westamerica Bancorp.

If you're bullish on Westamerica Bancorp, 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 $45.62 a share and then above more key resistance at $45.97 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 151,968 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 $49 to $52 a share. Any high-volume move above $52 to its 52-week high of $52.40 will then give this stock a chance to trend towards $55 a share.

I would avoid Westamerica Bancorp 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 $44.46 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 $41.99 to $41, or even $40 to $37 a share.

Commerce Bancshares

Another earnings short-squeeze prospect is regional banking player Commerce Bancshares(CBSH) - Get Report , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Commerce Bancshares to report revenue of $283 million on earnings of 71 cents per share.

The current short interest as a percentage of the float for Commerce Bancshares is notable at 6%. That means that out of 78.18 million shares in the tradable float, 4.73 million shares are sold short by the bear. The bears have also been increasing their bets from the last reporting period by 5.3%, or by about 238,00 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, Commerce Bancshares 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 $42.24 to its recent high of $46.97 a share. During that uptrend, shares of Commerce Bancshares 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 Commerce Bancshares, 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 $46.97 to $47.74 and then once it clears more resistance at $48.45 to its 52-week high of $48.70 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 545,634 shares. If that breakout materializes post-earnings, then this stock will set up to trend well north of $50 a share.

I would simply avoid Commerce Bancshares 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 $45.27 and its 20-day moving average of $45.19 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 200-day moving average of $43.76 to $42 a share.

Netflix

Another earnings short-squeeze trade idea is Internet delivery of TV shows and movies player Netflix(NFLX) - Get Report , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Netflix to report revenue of $1.75 billion on earnings of 8 cents per share.

The current short interest as a percentage of the float for Netflix is pretty high hat 9.9%. That means that out of the 417.74 million shares in the tradable float, 41.46 million shares are sold short by the bears. If this company can deliver the earnings news the bulls are looking for, then shares of Netflix could easily rip sharply higher post-earnings as the bears move fast to cover some of their positions.

From a technical perspective, Netflix 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 $93.55 to its recent high of $115.83 a share. During that uptrend, shares of Netflix 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 Netflix, 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 $115.83 to $119.35 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 22.18 million 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 $126.75 to its 52-week high of $129.30 a share.

I would simply avoid Netflix 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 $109.23 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 $104.80 to more key near-term support levels at $102.60 to $96.78 a share.

Del Frisco's Restaurant Group

My final earnings short-squeeze trading opportunity is casual dining restaurant player Del Frisco's Restaurant Group(DFRG) - Get Report , which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect Del Frisco's Restaurant Group to report revenue of $69.98 million on earnings of 4 cents per share.

The current short interest as a percentage of the float for Del Frisco's Restaurant Group is notable at 5.8%. That means that out of the 23.31 million shares in the tradable float, 1.37 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 12.6%, or by about 153,000 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 move fast to cover some of their trades.

From a technical perspective, Del Frisco's Restaurant Group is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has uptrending a bit over the last month and change, with shares moving higher off its low of $12.25 to its recent high of $14.34 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 this stock within range of triggering a major breakout trade post-earnings.

If you're in the bull camp on Del Frisco's Restaurant Group, 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 $14.34 to $15.10 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 415,660 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 $16 to $16.30 or even $17 to its 200-day moving average of $18.22 a share.

I would avoid Del Frisco's Restaurant Group 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 $13.71 to $13.59 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 $12.25 a share. Any high-volume move below that level will then push this stock into 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.