One potential earnings short-squeeze candidate is discount store operator Family Dollar Stores ( FDO), which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Family Dollar Stores to report revenue of $2.57 billion on earnings of $1.03 per share. This company has reported steady earnings results for the last eight quarters, and for the last four, net income has risen year-over-year by an average of 6%. For the most recent quarter, net income jumped 13% marking the biggest gain. >>5 Stocks Spiking on Unusual Volume The current short interest as a percentage of the float for Family Dollar Stores is notable at 5.8%. That means that out of the 87.43 million shares in the tradable float, 6.37 million shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a solid short-covering rally if the bulls get the earnings news they're looking for. From a technical perspective, FDO is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock recently formed a double bottom chart pattern at $59.06 to $59.38 a share. Following that bottom, shares of FDO have started to uptrend, with the stock moving higher from its low of $59.38 to its intraday high of $64.71 a share. During that uptrend, shares of FDO have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of FDO within range of triggering a near-term breakout trade. If you're bullish on FDO, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some key overhead resistance levels at $64.71 to $65.55 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 1.39 million shares. If we get that breakout, then FDO will set up to re-test or possibly take out its next major overhead resistance levels at $71.69 to $73.61 a share. I would avoid FDO or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 50-day at $62.51 a share and its 200-day at $61.93 a share with high volume. If we get that move, then FDO will set up to re-test or possibly take out its next major support levels at $59.38 to $59.06 a share. Any high-volume move below those levels will then put $58 to $57 into range for shares of FDO.