5 Stocks Set to Soar on Bullish Earnings

WINDERMERE, Fla. ( 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 timeframe that your profits add up quickly.

>>5 Stocks Under $10 Set to Soar

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. That's why it can be worth betting prior to the report - buy only if you have a very strong conviction that the stock is going to rip higher, and its acting technically very bullish. With that in mind, here's a look at several stocks that could experience big short squeezes when they report earnings this week.

If you liked this article you might like

Jim Cramer's 'Mad Money' Recap: How Do You Make Money in a Clueless Market?

MAKO Surgical Corporation (MAKO) Marked As A Barbarian At The Gate

'Mad Money' Lightning Round: Sirius XM Goes Higher

Jim Cramer's 'Mad Money' Recap: 10 to Hold the Rest of the Year

Jim Cramer's 7 Stocks in 60 Seconds: FB CCL BA JBL ISRG KBH LEN (Update 1)