With that in mind, here's a look at several stocks that could experience big short squeezes when they report earnings this week.

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Fred's

My first earnings short-squeeze trade idea is retail discount stores and full-service pharmacies operator Fred's ( FRED), which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Fred's to report revenue of $499.41 million on earnings of 27 cents per share.

The current short interest as a percentage of the float for Fred's is pretty high at 10.5%. That means that out of the 34.25 million shares in the tradable float, 3.55 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then FRED could rip higher post-earnings as the bears rush to cover some of their bets.

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From a technical perspective, FRED is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last five months, with shares soaring higher from its low of $12.24 to its recent high of $15.69 a share. During that uptrend, shares of FRED have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of FRED within range of triggering a near-term breakout trade post-earnings.

If you're bullish on FRED, then I would wait until after its report and look for long-biased trades if this stock manages to break out to a new 52-week high above $15.98 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 157,016 shares. If that breakout triggers, then FRED will set up to re-test or possibly take out its next major overhead resistance levels at $20 to $23 a share.

I would simply avoid FRED 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 $14.77 to its 50-day moving average at $14.32 a share with high volume. If we get that move, then FRED will set up to re-test or possibly take out its next major support levels at its 200-day moving average at $13.66 to $13.25 a share.

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