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.

MGIC Investment

MTG ChartMTG data by YCharts

My first earnings short-squeeze play is private mortgage insurance provider MGIC Investment (MTG - Get Report), which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect MGIC Investment to report revenue of $247.16 million on earnings of 23 cents per share.

The current short interest as a percentage of the float for MGIC Investment is pretty high at 13.9%. That means that out of the 336.15 million shares in the tradable float, 46.85 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of MGIC Investment could easily spike sharply higher post-earnings as the bears move fast to cover some of their positions.

From a technical perspective, MGIC Investment is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong the last six months, with shares moving higher from its low of $8.42 to its recent high of $11.60 a share. During that uptrend, this stock has been consistently making higher lows and higher highs, which is bullish technical price action.

If you're bullish on MGIC Investment, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its new 52-week high of $11.60 a share (or above Wednesday's intraday if greater) with high volume. Look for volume on that move that hits near or above its three-month average action of 5.35 million shares. If that breakout hits post-earnings, then this stock will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $13to $14 a share, or even $15 a share.

I would simply avoid MGIC Investment 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 its 50-day moving average of $11 a share and then below more near-term support levels at $10.94 to $10.75 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its next major support levels at $10.25 to $10 a share, or even its 200-day moving average of $9.57 a share to $9 a share.

Amira Nature Foods

ANFI ChartANFI data by YCharts

Another potential earnings short-squeeze trading opportunity is packaged specialty rice and other food products player Amira Nature Foods (ANFI), which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Amira Nature Foods to report revenue $217.26 million on earnings of 49 cents per share.

The current short interest as a percentage of the float for Amira Nature Foods is extremely high at 28.1%. That means that out of the 15.97 million shares in the tradable float, 4.48 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 0.7%, or by around 31,000 shares. If bears get caught pressing their bets into a bullish quarter, then this stock could easily rip sharply higher post-earnings as the bears jump to cover some of their trades.

From a technical perspective, Amira Nature Foods is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock has been uptrending over the last three months, with shares moving higher from its low of $8.56 to its recent high of $12.56 share. During that uptrend, shares of Amira Nature Foods have been making mostly higher lows and higher highs, which is bullish technical price action.

If you're in the bull camp on Amira Nature Foods, 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 $12.03 to $12.56 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 187,992 shares. If that breakout gets set off post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $14.08 to $14.74 a share, or even $16 a share.

I would simply avoid Amira Nature Foods 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 $11.17 to $11.06 a share and then below its 50-day at $10.83 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its next major support levels at $10.55 to $10 a share, or even $9.40 to $9 a share.

Cohen & Steers

CNS ChartCNS data by YCharts

Another potential earnings short-squeeze candidate is investment manager Cohen & Steers (CNS - Get Report), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Cohen & Steers to report revenue of $81 million on earnings of 40 cents per share.

The current short interest as a percentage of the float for Cohen & Steers is notable 5.5%. That means that out of the 19.77 million shares in the tradable float, 1.09 million shares are sold short by the bears. This stock sports a decent short interest and a very low tradable float. Any bullish earnings news could easily send the bears scrambling to cover some of their positions post-earnings and send the stock sharply higher.

From a technical perspective, Cohen & Steers is currently trending below both its 50-day and 200-day moving average, which is bearish. This stock has been downtrending badly for the last five months, with shares moving lower from its high of $44.09 to its recent low of $32.94 a share. During that downtrend, shares of Cohen & Steers has been making mostly lower highs and lower lows, which is bearish technical price action.

If you're bullish on Cohen & Steers, 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 $35 to its 50-day moving average of $36.15 a share and then above $36.43 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 117,832 shares. If that breakout develops post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $38 to $40 a share.

I would avoid Cohen & Steers or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 52-week low of $32.94 a share and then below some key past support at $32.56 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its major support levels at $30 to $28.37 a share, or even $27 a share.

Travelzoo

TZOO ChartTZOO data by YCharts

Another earnings short-squeeze prospect is online deal player Travelzoo (TZOO - Get Report), which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Travelzoo to report revenue of $33.80 million on earnings of 10 cents per share.

The current short interest as a percentage of the float for Travelzoo stands at 6.7%. That means that out of 6.45 million shares in the tradable float, 436,000 shares are sold short by the bear. This is a decent short interest on a stock with a very low tradable float. Any bullish earnings news could easily set off a large short-squeeze for shares of Travelzoo post-earnings that sends the bears running to cover some of their positions.

From a technical perspective, Travelzoo 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 $10.44 to its recent high of $12.57 a share. During that move, this stock has been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of Travelzoo within range of triggering a big breakout trade post-earnings.

If you're bullish on Travelzoo, 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 $13.50 to $13.84 a share and then above $14.29 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 193,157 shares. If that breakout materializes post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $16 to $17 a share.

I would simply avoid Travelzoo or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 20-day moving average of $11.44 a share to more near-term support at $11 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its next major support levels at $10.44 to $9.34 a share.

Mattel

MAT ChartMAT data by YCharts

My final earnings short-squeeze trade idea is toy products maker Mattel (MAT - Get Report), which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Mattel to report revenue of $995.36 million on a loss of 4 cents per share.

The current short interest as a percentage of the float for Mattel is pretty high art 12.6%. That means that out of the 337.40 million shares in the tradable float, 42.66 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 6.3%, or by 2.53 million shares. If bears get caught pressing their bets into a strong quarter, then this stock could easily rip sharply higher post-earnings as the bears jump to cover some of their trades.

From a technical perspective, Mattel is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been consolidating and trending sideways over the last two months and change, with shares moving between $25.23 on the downside and $27.33 on the upside. This stock has recently started to spike a bit higher off the lower-end of that range and it's beginning to trend close to triggering a big breakout trade above the upper-end of its range post-earnings.

If you're in the bull camp on Mattel, 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 its 50-day moving average of $26.26 to its 200-day at $27.27 a share and then above more resistance at $27.33 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 5.26 million shares. If that breakout hits post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $30 to $31 a share, or even $32 to $33 a share.

I would avoid Mattel 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 $25.23 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its next major support levels at $21.99 to around $20 a share.

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