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, let's take a look at several stocks that could experience big short squeezes when they report earnings this week.

Dave & Buster's Entertainment

My first earnings short-squeeze trading opportunity is combined dining and entertainment player Dave & Buster's Entertainment  (PLAY - Get Report), which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Dave & Buster's Entertainment to report revenue of $201.36 million on earnings of 28 cents per share.

The current short interest as a percentage of the float for Dave & Buster's Entertainment is pretty high at 10.4%. That means that out of the 10.11 million shares in the tradable float, 1.05 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 14.5%, or by about 134,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of DAVE could easily rip sharply higher post-earnings as the bears rush to cover some of their positions.

From a technical perspective, PLAY is currently trending above both its 50-day moving average, which is bullish. This stock has been consolidating and trending sideways over the last two months, with shares moving between $29.30 on the downside and $33.15 on the upside. Shares of PLAY ripped higher on Monday back above its 50-day moving average of $30.36 a share with decent upside volume flows. That move is now starting to push shares of PLAY within range of triggering a major breakout trade above the upper-end of its recent sideways trending chart pattern.

If you're bullish on PLAY, 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 $32 to its all-time high of $33.15 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 326,097 shares. If that breakout triggers post-earnings, then shares of PLAY will set up to enter new all-time-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $40 to $45 a share.

I would simply avoid PLAY or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some near-term support levels at $29.50 to $29.30 a share and then below more support at $28 a share with high volume. If we get that move, then PLAY will set up to re-test or possibly take out its next major support levels at 25.60 to $25 a share, or even $22 a share.

Bed Bath & Beyond

Another potential earnings short squeeze is home furnishings retailer chain stores operator Bed Bath & Beyond  (BBBY - Get Report), which is set to release its numbers on Wednesday after the market close. Wall Street analysts, on average, expect Bed Bath & Beyond to report revenue $3.37 billion on earnings of $1.81 per share.

The current short interest as a percentage of the float for Bed Bath & Beyond is notable at 7.3%. That means that out of the 175.87 million shares in the tradable float, 12.99 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 2.2%, or by about 275,000 shares. If the bears get caught pressing their bets into a bullish quarter, then shares of BBBY could easily spike sharply higher post-earnings as the bears move fast to cover some of their trades.

From a technical perspective, BBBY is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock spiked modestly higher on Monday right off its 50-day moving average of $76.14 a share with decent upside volume flows. That spike is starting to push shares of BBBY within range of triggering a major breakout trade post-earnings above some key overhead resistance levels.

If you're in the bull camp on BBBY, 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 $77.80 to $79 a share and then above $79.36 to its 52-week high at $79.64 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 2.33 million shares. If that breakout hits post-earnings, then BBBY will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $85 to $90 a share, or even $95 a share.

I would simply avoid BBBY 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 $76.14 a share to more near-term support at $75 a share with high volume. If we get that move, then BBBY will set up to re-test or possibly take out its next major support levels at $73.61 to $73 a share, or $71 to its 200-day moving average of $69.14 a share.

MSC Industrial Direct

Another potential earnings short-squeeze candidate is industrial equipment wholesale player MSC Industrial Direct  (MSM - Get Report), which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect MSC Industrial Direct to report revenue of $718.17 million on earnings of 85 cents per share.

The current short interest as a percentage of the float for MSC Industrial Direct is rather high at 11.4%. That means that out of the 44.37 million shares in the tradable float, 5.06 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of MSM could easily rip sharply higher post-earnings as the bears rush to cover some of their positions.

From a technical perspective, MSM is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last three months, with shares moving lower from its high of $82.58 to its recent low of $69.56 a share. During that downtrend, shares of MSM have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of MSM have started to bounce off that $69.56 low and it's starting to trend within range of triggering a big breakout trade post-earnings above some key near-term overhead resistance levels.

If you're bullish on MSM, then I would wait until after its report and look for long-biased trades if this stock manages to break out some key near-term overhead resistance levels at $73 a share to its 50-day moving average of $74.10 a share and then above more key overhead resistance at $74.13 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 555,790 shares. If that breakout begins post-earnings, then MSM will set up to re-test or possibly take out its next major overhead resistance levels at $78 to its 200-day moving average of $80 a share.

I would avoid MSM 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 $71 a share to its 52-week low of $69.56 a share with high volume. If we get that move, then MSM will set up to enter new 52-week-low territory, which is bearish technical price action. Some possible downside targets off that move are $66 to $63 a share, or even $60 to $56 a share.

Mitcham Industries

Another earnings short-squeeze prospect is oil-related services and equipment stock Mitcham Industries  (MIND - Get Report), which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Mitcham Industries to report revenue of $14.10 million on a loss of 55 cents per share.

The current short interest as a percentage of the float for Mitcham Industries is notable at 7.7%. That means that out of 11.41 million shares in the tradable float 885,000 shares are sold short by the bears. This is a decent short interest on a stock with a relatively low tradable float. Any bullish earnings news could easily spark a large short-covering rally for shares of MIND post-earnings that sends the bears scrambling to cover some of their bets.

From a technical perspective, MIND is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last two months, with shares moving sharply lower from its high of $7.92 to its new 52-week low of $4.50 a share hit on Monday. During that downtrend, shares of MIND have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of MIND ripped higher off its 52-week low of $4.50 on Monday with strong upside volume flows. That move is now starting to push shares of MIND within range of triggering a near-term breakout trade post-earnings.

If you're bullish on MIND, 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 $5.27 to $5.62 a share and then above its 50-day moving average of $5.90 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 57,986 shares. If that breakout develops post-earnings, then MIND will set up to re-test or possibly take out its next major overhead resistance levels at $6.69 to $7.14 a share, or even $7.92 a share.

I would simply avoid MIND or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its new 52-week low of $4.50 a share with high volume. If we get that move, then MIND will set up to enter new 52-week-low territory, which is bearish technical price action. Some possible downside targets off that mover are $4 to $3.50 a share, or even $3 a share.

Synergy Resources

My final earnings short-squeeze play is oil and natural gas player Synergy Resources  (SYRG), which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Synergy Resources to report revenue of $28.21 million on earnings of 4 cent per share.

The current short interest as a percentage of the float for Synergy Resources is pretty high at 11%. That means that out of the 69.03 million shares in the tradable float, 7.61 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 2.4%, or by about 180,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of SYRG could easily rip sharply higher post-earnings as the bears move fast to cover some of their positions.

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 over the last month, with shares moving higher from its low of $10.40 to its recent high of $12.64 a share. During that uptrend, shares of SYRG have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of SYRG within range of triggering a big breakout trade post-earnings.

If you're in the bull camp 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 key near-term overhead resistance levels at $12.64 to $13.25 a share and then above $13.60 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 1.83 million shares. If that breakout begins post-earnings, then SYRG will setup to enter new 52-week-high territory above $14.11, which is bullish technical price action. Some possible upside targets off that breakout are $17 to $20 a share.

I would avoid SYRG or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back both its 200-day moving average of $11.95 a share and its 50-day moving average of $11.70 a share with volume. If we get that move, then SYRG will set up to re-test or possibly take out its next major support levels at $10.40 to $9 a share.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.