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.

E2open

My first earnings short-squeeze play is application software player E2open (EOPN) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect E2open to report revenue of $20.58 million on a loss of 18 cents per share.

The current short interest as a percentage of the float for E2open is extremely high at 14.4%. That means that out of the 21.91 million shares in the tradable float, 31.6 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 spark a sharp short-covering rally for shares of EOPN post-earnings.

From a technical perspective, EOPN is currently trending below its 200-day moving average and just above its 50-day moving average, which is neutral trendwise. This stock has been uptrending strong over the last two months, with shares moving higher from its low of $5.31 to its recent high of $9.93 a share. During that uptrend, shares of EOPN have been consistently making higher lows and higher highs, which is bullish technical price action. This stock has now pulled back a bit off that $9.93 high, but it's still trending within range of triggering a big breakout trade post-earnings.

If you're bullish on EOPN, 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 $9.93 to $10.96 a share and then above its gap-down-day high from last September at $11.51 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 353,167 shares. If that breakout develops post-earnings, then shares of EOPN will set up to re-fill some of its gap-down-day zone from last September that started around $16 a share.

I would simply avoid EOPN 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 $7.31 a share with high volume. If we get that move, then EOPN will set up to re-test or possibly take out its next major support levels at $6.15 to its 52-week low of $5.31 a share.

Barracuda Networks

Another potential earnings short-squeeze trade idea is security and storage solutions player Barracuda Networks (CUDA) , which is set to release its numbers on Thursday after the market close Wall Street analysts, on average, expect Barracuda Networks to report revenue $69.98 million on earnings of 5 cents per share.

The current short interest as a percentage of the float for Barracuda Networks is reasonably high at 9.2%. That means that out of the 9.93 million shares in the tradable float, 920,000 shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 2.9%, or by about 25,000 shares. If the bears get caught pressing their bets into a bullish quarter, then shares of CUDA could easily rip sharply higher post-earnings as the shorts move fast to cover some of their trades.

From a technical perspective, CUDA 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 four months, with shares moving higher from its low of $23.95 to its recent high of $38.23 a share. During that uptrend, shares of CUDA have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of CUDA within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on CUDA, 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 at $38.23 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 270,557 shares. If that breakout triggers post-earnings, then CUDA will set up to re-test or possibly take out its all-time high at $44.40 a share.

I would simply avoid CUDA 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 $34.74 a share and below some near-term support at $34.35 a share with high volume. If we get that move, then CUDA will set up to re-test or possibly take out its next major support level at its 200-day moving average of $30.10 a share.

Container Store Group

Another potential earnings short-squeeze candidate is storage and organizational products retailer Container Store Group (TCS - Get Report) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Container Store Group to report revenue of $199.16 million on earnings of 7 cents per share.

The current short interest as a percentage of the float for Container Store Group is extremely high at 17.3%. That means that out of the 16.70 million shares in the tradable float, 2.89 million shares are sold short by the bears. This is a large short interest on a stock with a very low tradable float. If the bulls get the earnings news they're looking for, then shares of TCS could easily spike sharply higher post-earnings as the bears rush to cover some of their positions.

From a technical perspective, TCS is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently formed a double bottom chart pattern at $16.58 to $16.59 a share. Following that bottom, shares of TCS have started to spike modestly higher and the stock is beginning to move within range of triggering a near-term breakout trade post-earnings.

If you're bullish on TCS, 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 $19.70 a share and then above some more near-term resistance at $20.84 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 481,044 shares. If that breakout develops post-earnings, then TCS will set up to re-test or possibly take out its next major overhead resistance levels at $23.60 to $24 a share, or even $27 a share.

I would avoid TCS 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 $16.59 to its 52-week low of $15.49 a share with high volume. If we get that move, then TCS will set up to enter new 52-week-low territory below $15.49 a share, which is bearish technical price action.

Synergy Resources

Another earnings short-squeeze prospect is energy player Synergy Resources (SYRG) , which is set to release numbers on Friday before the market open. Wall Street analysts, on average, expect Synergy Resources to report revenue of $41.62 million on earnings of 11 cents per share.

The current short interest as a percentage of the float for Synergy Resources is very high at 11.5%. That means that out of 68.75 million shares in the tradable float, 7.92 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 6%, or by about 445,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of SYRG could easily jump sharply higher post-earnings as the shorts scramble to cover some of their trades.

From a technical perspective, SYRG is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong over the last month, with shares moving higher from around $8 a share to its recent high of $13.19 a share. During that uptrend, shares of SYRG have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of SYRG within range of triggering a major breakout trade post-earnings.

If you're bullish on SYRG, 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 $13.19 to $13.60 a share and then above $13.75 to its 52-week high at $14.11 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 1.32 million shares. If that breakout materializes post-earnings, then SYRG will set up to enter new 52-week-high territory above $14.11 a share, which is bullish technical price action. Some possible upside targets off that breakout are $15 to $17 a share.

I would simply avoid SYRG 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 $11.56 a share with high volume. If we get that move, then SYRG will set up to re-test or possibly take out its next major support levels at $9 to $8 a share.

PriceSmart

My final earnings short-squeeze play is membership shopping warehouse clubs player PriceSmart PSMT, which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect PriceSmart to report revenue of $651.03 million on earnings of 73 cents per share.

The current short interest as a percentage of the float for PriceSmart is decent at 5.9%. That means that out of the 23.69 million shares in the tradable float, 1.41 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 6.1%, or by about 81,000 shares. If the bears get caught pressing their bets into a bullish quarter, then shares of PSMT could easily rip sharply higher post-earnings as the shorts move fast to cover some of their trades.

From a technical perspective, PSMT is currently trending just below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending a bit over the last month, with shares moving higher from its low of $84.75 to its recent high of $93.74 a share. During that uptrend, shares of PSMT have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of PSMT within range of triggering a near-term breakout trade post-earnings.

If you're in the bull camp on PSMT, 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 $93.74 to $94.50 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 144,763 shares. If that breakout begins post-earnings, then PSMT will set up to re-test or possibly take out its next major overhead resistance levels at $98.72 to $99.50 a share, or even $102 to $105 a share.

I would avoid PSMT 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 $88.33 to $84 a share with high volume. If we get that move, then PSMT will set up to re-test or possibly take out its next major support levels at $80 to its 52-week low of $78.63 a share.

-- 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.