DELAFIELD, Wis. (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 time frame that your profits add up quickly.

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 by waiting. That's why it can be worth betting prior to the report -- but only if the stock is acting technically very bullish and you have a very strong conviction that it is going to rip higher. Just remember that even when you have that conviction and have done your due diligence, the stock can still get hammered if Wall Street doesn't like the numbers or guidance.

If you do decide to bet ahead of a quarter, then you might want to use options to limit your capital exposure. Heavily shorted stocks are usually the names that make the biggest post-earnings moves and have the most volatility. I personally prefer to wait until all the earnings-related news is out for a heavily shorted stock and then jump in and trade the prevailing trend.

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

ReWalk Robotics

My first earnings short-squeeze play is medical equipment player ReWalk Robotics (RWLK - Get Report) , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect ReWalk Robotics to report revenue of $1.58 million on a loss of 26 cents per share.

The current short interest as a percentage of the float for ReWalk Robotics is pretty high 10.6%. That means that out of the 5.07 million shares in the tradable float, 538,900 shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 8.5%, or by 41,000 shares. If the bears get caught pressing their bets into a bullish quarter, then shares of RWLK could easily trend sharply higher post-earnings as the shorts rush to cover some of their trades.

From a technical perspective, RWLK has been trending sideways for the last few weeks, with shares moving between $28.91 on the downside and just over $33 a share on the upside. Y high-volume move above the upper-end of its recent sideways trading chart pattern post-earnings could easily trigger a big breakout trade for shares of RWLK post-earnings.

If you're bullish on RWLK, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at around $33 to $35.55 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 1.42 million shares. If that breakout hits post-earnings, then RWLK will set up to re-test or possibly take out its next major overhead resistance level at its all-time high of $43.71 a share.

I would simply avoid RWLK 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 at $28.91 a share with high volume. If we get that move, then RWLK will set up to re-test or possibly take out its next major support levels at $25.10 to $23.50 a share.

ExOne Company

Another potential earnings short-squeeze play is three dimensional printing machines and products player ExOne Company (XONE - Get Report) , which is set to release its numbers on Wednesday after the market close. Wall Street analysts, on average, expect ExOne Company to report revenue $15.30 million on a loss of 13 cents per share.

The current short interest as a percentage of the float for ExOne Company is extremely high at 56.8%. That means that out of the 8.71 million shares in the tradable float, 4.95 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 10.5%, or by 469,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of XONE could easily rip sharply higher post-earnings as the shorts scramble to cover some of their positions.

From a technical perspective, XONE is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending over the last month, with shares moving higher from its low of $16 to its recent high of $26.46 a share. Shares of XONE recently pulled back off that $26.46 high and the stock has temporarily formed a double bottom chart pattern at $20.37 to $20.36 a share.

If you're in the bull camp on XONE, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 50-day moving average of $23.11 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 612,949 shares. If that breakout begins post-earnings, then XONE will set up to re-test or possibly take out its next major overhead resistance levels at $26.46 to $29.50 a share, or even $30.50 to its 200-day moving average of $31.96 a share.

I would simply avoid XONE or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below those double bottom support levels at $20.37 to $20.36 a share with high volume. If we get that move, then XONE will set up to re-test or possibly take out its next major support level at its 52-week low of $16 a share.

Rocket Fuel

Another potential earnings short-squeeze candidate is artificial-intelligence digital advertising solutions provider Rocket Fuel (FUEL) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Rocket Fuel to report revenue of $98.67 million on a loss of 30 cents per share.

The current short interest as a percentage of the float for Rocket Fuel is extremely high at 24.8%. That means that out of the 19.31 million shares in the tradable float, 4.78 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of FUEL could easily rip sharply higher post-earnings as the bears jump to cover some of their bets. Keep in mind that this company has a very low float, so a solid quarter could produce a massive short-squeeze due to the large number of shorts involved in the name.

From a technical perspective, FUEL is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock recently formed a double bottom chart pattern at $14.64 o $15.20 a share. Since that bottom, shares of FUEL have started to uptrend back above its 50-day moving average. That move is now quickly pushing shares of FUEL within range of triggering a major breakout trade post-earnings.

If you're bullish on FUEL, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $17.76 to $18.19 a share and then above its gap-down-day high from August at $19.24 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 696,940 shares. If that breakout materializes post-earnings, then FUEL will set up to re-fill some of its previous gap-down-day zone from August that started near $27 a share.

I would avoid FUEL or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 50-day moving average of $16.23 a share with high volume. If we get that move, then FUEL will set up to re-test or possibly take out its all-time low at $14.29 a share.

YY Inc.

Another earnings short-squeeze prospect is China-based online social platform operator YY Inc. (YY - Get Report) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect YY Inc. to report revenue of $152.54 million on earnings of 76 cents per share.

The current short interest as a percentage of the float for YY Inc. is very high at 15.3%. That means that out of 27.61 million shares in the tradable float, 4.22 million shares are sold short by the bears. This is a large short interest on a stock with a very low tradable float. Any bullish earnings news could easily set off a large short-squeeze post-earnings that forces the bears to close out some of their short positions.

From a technical perspective, YY is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last few weeks, with shares moving higher from its low of $67.10 to its recent high of $86 a share. During that uptrend, shares of YY have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of YY within range of triggering a near-term breakout trade post-earnings.

If you're bullish on YY, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $85 to $86 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 1.53 million shares. If that breakout develops post-earnings, then YY will set up to re-test or possibly take out its next major overhead resistance levels at $92 to its all-time high at $96.39 a share. Any high-volume move above $96.39 a share will then give YY a chance to tag or trend north of $100 a share.

I would simply avoid YY 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 $78.69 to $76.64 a share and then below its 200-day moving average of $73.95 a share with high volume. If we get that move, then YY will set up to re-test or possibly take out its next major support level at $67.10 to $62 a share.

J.C. Penney

My final earnings short-squeeze play is department store player J.C. Penney (JCP - Get Report) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect J.C. Penney to report revenue of $2.81 billion on a loss of 80 cents per share.

The current short interest as a percentage of the float for J.C. Penney is extremely high at 33%. That means that out of the 290.77 million shares in the tradable float, 96.40 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 9.8%, or by 8.56 million shares. If the bears get caught pressing their bets into a bullish quarter, then shares of JCP could easily rip sharply higher post-earnings as the shorts rush to cover some of their trades.

From a technical perspective, JCP is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently saw its share price collapse from $11.30 to its low of $6.73 a share. Following that collapse, shares of JCP have started to trend sideways over the last few weeks, with shares moving between $6.73 on the downside and $7.87 on the upside. Any high-volume move above the upper-end of its recent sideways trading chart pattern post-earnings could easily trigger a big breakout trade for shares of JCP.

If you're in the bull camp on JCP, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some key near-term overhead resistance levels at $7.86 to $7.87 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 21.51 million shares. If that breakout develops post-earnings, then JCP will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $8.57 a share to its 50-day moving average of $8.93 a share. Any high-volume move above those levels will then give JCP a chance to tag $10 a share.

I would avoid JCP 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 at $6.73 a share with high volume. If we get that move, then JCP will set up to re-test or possibly take out its 52-week low of $4.90 a share.

To see more potential earnings short squeeze plays, check out the Earnings Short-Squeeze Plays portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com.

You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.