WINDERMERE, Fla. ( Stockpickr) -- With earnings season about to kick off on Wall Street in a big way, it's time for market-players to create a powerful watch list of stocks due to report numbers that are also heavily shorted by the bears.

Short-sellers hate being caught short a stock that produces earnings that please the bulls. 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 search 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 timeframe that your profits add up quickly.

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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 a stock will be in such high demand that you risk missing a lot of the move. That's why it can be worth betting prior to the report -- but only if you have a very strong conviction that the stock is going to rip higher.

Here's a look at a number of stocks that could experience big short squeezes when they report earnings this week.

OCZ Technology

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My first earnings short-squeeze play is OCZ Technology ( OCZ), which is set to report its numbers on Wednesday after the market close. OCZ is a provider of high-performance solid state drives and memory modules for computing devices and systems. Wall Street analysts, on average, expect the company to report revenue of $77.76 million on earnings of 3 cents per share.

Auriga issued a hold rating on this stock this week with a $5 price target in anticipation of a solid earnings report. This stock has been destroyed in front of the quarter, having fallen from its July high of $10.94 a share to its current price of under $5 a share. If OCZ Te can report a solid quarter and raise guidance, then we could easily see a large short squeeze off these depressed levels.

The current short interest as a percentage of the float for OCZ Technology is an extremely large 35.9%. That means that out of the 47.69 million shares in the tradable float, 17.35 million are sold short by the bears. It's worth pointing out that the bears have also been increasing their bets from the last reporting period by 7.7%, or about 1.2 million shares.

From a technical standpoint, this stock is currently trading substantially below its 50-day and 200-day moving averages, which is bearish. This stock sold off sharply from its July high of $10.94 a share, but since then, shares have started to trade sideways since September between $5.82 and $4.80 a share. This sideways pattern will set the stock up for a clear trend after earnings once shares move above or below the range.

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If you're bullish on OCZ, I would buy this stock after its report if the stock can break out above $5.86 a share with big volume. Look for volume that's tracking in close to or above its three-month average volume 1.68 million shares.

Another way to play this is to buy after report if the key support level at 4.80 holds and the stock starts to pop. I would look to get aggressive from the long side if we breakout above $5.86 since there's a lot of resistance near that level. Target a move back toward the 200-day moving average at $7.28 or possibly higher if the bulls can spark a big short squeeze here.

Acuity Brands

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Another potential earnings short-squeeze trade is Acuity Brands ( AYI), which is set to report results on Wednesday before the market open. This company is a provider of lighting fixtures, control devices, components, systems and services for commercial and institutional, industrial, infrastructure, and residential applications for various markets throughout North America and select international markets. Wall Street analysts, on average, expect Acuity Brands to report revenue of $482.95 million on earnings of 79 cents per share.

Just this morning, Sterne Agee started coverage on this stock with an underperform rating and a $26 price target. Sterne could be a bit late to the party here since Acuity has seen its shares fall from a July high of $56.63 a share to its current price of just over $35 a share.

The current short interest as a percentage of the float for Acuity Brands is worth mentioning at 8.2%. That means that out of the 42.04 million shares in the tradable float, 3.51 million are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 16.2%, or by about 488,900 shares. If the bears are caught leaning the wrong way on AYI in front of the quarter, then we could get a sharp short-squeeze that spikes the stock higher.

From a technical standpoint, this stock is trading substantially both its 50-day and 200-day moving averages, which is bearish. That said, the stock is trading right around some previous support levels from 2010 near $35 to $34.26 a share. As long as those levels hold up post-earnings, then we could see a big rally kickoff. Keep in mind that the relative strength index reading on this stock is showing a 30, which represents an oversold condition.

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If you're bullish on this name, I would wait until after its report and buy the stock off any strength as long as those support levels I mentioned above hold up. I would add to any long position if the stock then takes out some overhead resistance at around $39.13 with volume. Look for volume that's tracking in close to or above its three-month average action of 517,600 shares. Target a run back towards its 50-day moving average of $42.81 a share or possibly higher if the bulls can send the shorts running post-earnings.

I would only get short this stock if it drops below $34 a share after earnings on solid volume. A move below that level should set this stock up for a big fall back towards $30 a share or possibly even lower if the bears knock this name down post-earnings.

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Marriott International

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One earnings short-squeeze trade in the hotels and motels sector is global operator and franchisor of hotels and related lodging facilities Marriott International (MAR), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Marriott to report revenue of $2.82 billion on earnings of 27 cents per share.

Marriott met Wall Street estimates last quarter after topping forecasts for the prior two quarters. Revenues have gone up in the past four quarters for Marriott, by 19.6%, 5.6%, 7.8% and 7.2%. Analysts are looking for a 6.4% rise in revenue for this quarter.

Monday, Morgan Stanley issued a report on Marriott, maintaining its equal-weight rating with a price target of $31 a share. Morgan said it believes investors will be focused on Marriott's forward guidance and booking trend but that "unless MAR shows improvement narrowing the gap between its results and the industry," Morgan sees little upside from the company's third-quarter earnings.

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The current short interest as a percentage of the float for Marriott stands at 6.3%. That means that out of the 302.06 million shares in the tradable float, 17.61 million are sold short by the bears. This isn't a huge short interest, but it's big enough to set off a smart short-covering rally if the bulls hear what they're looking for.

From a technical standpoint, this stock is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock dropped from its July high of $37.77 to a recent low of $25.49 a share. Since that fall, the stock has started to form a sideways trading pattern between $25.50 and close to $30 a share.

The way I would play this stock is to wait until after its report and buy the stock if it breaks out above $30 a share on big volume. Look for volume that's tracking in close to or above its three-month average action of 6 million shares. If we get a big volume breakout, then I would target a 5% to 10% move post-earnings.

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I would get short this stock only if it drops below that major near-term support zone at $25.50 to $25.33 a share on big volume after they report earnings. I would then add to any short bets if the stock takes out $24.18 with volume, and target a drop back towards $22 to $21 a share if the bears hammer this lower post-earnings.

Ruby Tuesday

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One earnings short-squeeze play in the computer storage devices industry is Ruby Tuesday ( RT), which is set to release numbers on Wednesday after the market close. This company, including its wholly-owned subsidiaries, owns and operates Ruby Tuesday, Marlin & Ray's, Truffles and Wok Hay casual dining restaurants. Wall Street analysts, on average, expect Ruby Tuesday to report revenue of $334.03 million on earnings of 6 cents per share.

If you're looking for a beaten-down stock with short-squeeze and bounce potential off earnings, then consider Ruby Tuesday. This stock has dropped from its July high of $11.33 a share to its current price of just around $7 a share. That said, the company is going to have to do better than its last report, in which it reported earnings of 25 cents vs. Wall Street estimates of 31 cents.

The current short interest as a percentage of the float for Ruby Tuesday is rather large at 10.8%. That means that out of the 50.40 million shares in the tradable float, 5.88 million are sold short by the bears. This is a large short interest on a stock with a relatively low float. If Ruby can beat and raise guidance, then we could easily see solid short-covering rally.

From a technical standpoint, this stock is trading below both its 50-day and 200-day moving averages, which is bearish. That said, the stock has started to form a sideways trading pattern between $8.50 and $6.63 a share, after dropping from those July highs. If this stock can take out the upper end of that range post-earnings, then we could a solid spike higher.

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The way I would play this name is to wait until after they report their results and jump into this name long if the stock trades above its 50-day of $8 a share and then above $8.50 with volume. Look for volume that's tracking in close to or above its three-month average volume of 901,800 shares. I would target a run back towards $9.50 or possibly even higher if the bulls push this up post-earnings.

I would only short this name after earnings if the stock trades back below that near-term support zone at $6.63 a share on heavy volume. I would add to any short position if the stock then takes out $6 to $5.81 a share and target a steep drop if the bears pound this lower post-earnings.

Resources Connection

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My final earnings short-squeeze candidate today is Resources Connection ( RECN), which is set to release numbers on Tuesday after the market close. This professional services firm specializes in finance, accounting, risk management and internal audit, corporate advisory and strategic communications. Wall Street analysts, on average, expect Resources Connection to report revenue of $135.78 million on earnings of 5 cents per share.

This stock has been destroyed in front of the quarter, plunging from its July high of $13.43 to its current price of around $9.20 a share. Analysts are looking for a beat this quarter from Resources after it met estimates of 9 cents per share last quarter.

The current short interest as a percentage of the float for Resources Connection stands at 7.3%. That means that out of the 44.03 million shares in the tradable float, 1.59 million are sold short by the bears. This is more than enough short-sellers to spark a solid short-covering rally if Resources can report a good quarter and raise guidance.

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From a technical standpoint, this stock is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has also been steadily making lower highs and lower lows for most of the year, which is also bearish. That said, during the last month shares have turned around and started to make higher highs and higher lows, which could signal a trend change.

The way I would play this stock is to buy some shares after the earnings release if the stock can trade above $10 and then its 50-day moving average of $10.32 a share on solid volume. Look for volume that's tracking in close to or above its three-month average action of 428,500 shares. I would then add to any long position if the stock can take out $11.40 a share and target a run back toward $13.40 if the bulls gain full control of this stock post-earnings.

I would get short this stock only if shares drop below $9 and then $8.26 a share on big volume after the report. A move below those levels should set this stock up for a big drop as the bears pound this name below its 52-week low of $8.26 post-earnings.

To see more potential earnings short squeeze candidates, including Richardson Electronics ( RELL), Callidus Software ( CALD) and Landec ( LNDC), check out the Earnings Short Squeeze Plays portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.

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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.