I would simply avoid HOV or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below some near-term support at $5 a share with high volume. If we get that move, then HOV will set up to re-test or possibly take out its next major support levels at $4.75 a share to its 50-day at $4.59 a share.

Adobe Systems

Another potential earnings short-squeeze trade is Adobe Systems ( ABDE), which is set to release its numbers on Thursday after the market close. This company offers a line of software and services used by creative professionals, marketers, developers, enterprises and consumers for creating, managing, delivering, measuring, optimizing and engaging with compelling operating systems. Wall Street analysts, on average, expect Adobe Systems to report revenue of $1.10 billion on earnings of 57 cents per share.

During the past three quarters, this company's quarterly results have missed Wall Street estimates. For the last quarter, the company reported net income of 44 cents per share versus Wall Street estimates of 47 cents per share.

The current short interest as a percentage of the float for Adobe Systems stands at 3.5%. That means that out of the 461.48 million shares in the tradable float, 17.36 million shares are sold short by the bears. This is far from a huge short interest, but it's more than enough to spark a decent short-covering rally if ADBE gives the bulls what they're looking for.

From a technical perspective, ADBE is currently trending well above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last six months, with shares moving from a low of $29.52 to its intraday high today of $36.11 a share. During that uptrend, shares of ADBE have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed ADBE within range of triggering a major breakout trade post-earnings.

If you're in the bull camp on ADBE, then I would wait until after its report and look for long-biased trades once this stock manages to break out above some past overhead resistance at $37.40 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 3,960,780 shares. If that breakout triggers, then ADBE will set up to hit or trend north of $40 a share.

If you liked this article you might like

Hurricane Irma, Trump and ECB - 5 Things You Must Know Before the Market Opens

Congress Is Back in Session and Tax Reform Is Top of Mind - Week Ahead

Housing Data Drives Down Homebuilding Stocks

Stock Futures Pare Gains After Off-the-Mark May Jobs Report

5 Things You Must Know Before the Market Opens Friday