WINDERMERE, Fla. (Stockpickr) -- With quarterly earnings season in full swing on Wall Street, it's time for market-players to create a powerful watch list of stocks due to report numbers that also sport a decent short interest.Short-sellers hate being caught short a stock that produces bullish results. When this happens, we often see tradable short-squeezes develop as the bears rush to cover their positions to avoid big losses. Even the savviest short-sellers know that it's not wise to be caught short a stock once a bullish earnings report kicks off 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 timeframe that your profits add up quickly. >>5 Big Stocks to Trade for Gains 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 trade 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. That's why it can be worth betting prior to the report -- but only if the stock is acting technically bullish and you have a strong conviction that it is going to rip higher. With that in mind, here's a look at several stocks that could experience big short squeezes when they report quarterly earnings this week.
Twitter and become a fan on Facebook. 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.