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 very bullish technically 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.

CyberArk Software

My first earnings short-squeeze candidate is CyberArk Software  (CYBR - Get Report), which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect CyberArk Software to report revenue of $32.28 million on earnings of 6 cents per share.

The current short interest as a percentage of the float for CyberArk Software is pretty high at 13.3%. That means that out of the 21.79 million shares in the tradable float, 2.90 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 18.4%, or by around 451,00 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 move fast to cover some of their positions.

From a technical perspective, CyberArk Software 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 and change, with shares moving higher from its low of $53.19 to its recent high of $63.28 a share. During that uptrend, this stock has been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of CyberArk Software within range of triggering a big breakout trade post-earnings.

If you're bullish on CyberArk Software, 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 $63.28 to just over $65 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 2.49 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 $70 to $75 a share.

I would simply avoid CyberArk Software 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 $56 to $53.19 a share and then below its 200-day moving average of $52.11 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 $49 to $47.50 a share.

Papa Murphy's

Another potential earnings short-squeeze play is fresh pizza stores operator Papa Murphy's  (FRSH), which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect Papa Murphy's to report revenue $28.72 million on earnings of 9 cents per share.

The current short interest as a percentage of the float for Papa Murphy's is extremely high at 28.4%. That means that out of the 11.66 million shares in the tradable float, 2.59 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 18.4%, or by about 402,000 shares. If bears get caught pressing their bets into a strong quarter, then this stock could easily soar sharply higher post-earnings as the bears scramble to cover some of their positions.

From a technical perspective, Papa Murphy's is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last two months, with shares moving lower from its high of $22.72 to its recent low of $18.80 a share. During that downtrend, shares of Papa Murphy's have been making mostly lower highs and lower lows, which is bearish technical price action.

If you're in the bull camp on Papa Murphy's, 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 $20.97 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 240,014 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 $22.16 to its all-time high of $22.72 a share. Any high-volume move above $22.72 will then give this stock a chance to tag $25 to $30 a share.

I would simply avoid Papa Murphy's or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some near-term support at $18.80 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 $17 to $16.35, or even $16 to its 200-day moving average of $15.13 a share.

Freshpet

Another potential earnings short-squeeze candidate is pet food player Freshpet  (FRPT - Get Report), which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Freshpet to report revenue of $27.22 million on a loss of 5 cents per share.

The current short interest as a percentage of the float for Freshpet is extremely high at 45.9%. That means that out of the 19.72 million shares in the tradable float, 9.06 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 12%, or by around 969,000 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 move fast to cover some of their trades.

From a technical perspective, Freshpet is currently trending below both its 50-day and 20-day moving averages, which is bearish. This stock has been downtrending badly over the last four months and change, with shares falling sharply lower from its high of $25.92 to its recent low of $15.60 a share. During that downtrend, shares of Freshpet have been making mostly lower highs and lower lows, which is bearish technical price action .

If you're bullish on Freshpet, 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 $17.44 to its 20-day at $17.46 and then above its 50-day at $18.24 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 345,659 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 $20.11 to $21.64, or even $23 to $24 a share.

I would avoid Freshpet 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 $15.78 to $15.60 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 $14 to its all-time low of $13.11 a share.

PRA Group

Another earnings short-squeeze prospect is financial and business services player PRA Group  (PRAA - Get Report), which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect PRA Group to report revenue of $249.64 million on earnings of $1.15 per share.

The current short interest as a percentage of the float for PRA Group is extremely high at 28%. That means that out of 47.44 million shares in the tradable float, 13.29 million shares are sold short by the bear. This is loaded with shorts and it sports a reasonably low tradable float. Any bullish earnings news could easily set off a large short-squeeze for shares of PRA Group that send the bears running to cover some of their positions.

From a technical perspective, PRA Group is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been consolidating and trending sideways over the last few weeks, with shares moving between $60.24 on the downside and $64.82 on the upside. Any high-volume move above the upper-end of its recent sideways trending chart pattern post-earnings could easily trigger a big breakout trade for shares of PRA Group.

If you're bullish on PRA Group, 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 $64.49 to $64.82 a share and then above its 52-week high of $65 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 370,919 shares. If that breakout develops 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 $70 to $75, or even $80 to $85 a share.

I would simply avoid PRA Group 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 $61.75 a share to more support at $60.24 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 $59 to its 200-day moving average of $57.52 a share.

Wayfair

My final earnings short-squeeze trading opportunity is e-commerce business player Wayfair  (W - Get Report), which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Wayfair to report revenue of $438.49 million on a loss of 29 cents per share.

The current short interest as a percentage of the float for Wayfair is extremely high at 34.2%. That means that out of the 28.8 million shares in the tradable float, 9.87 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 10.1%, or by about 905,000 shares. If bears get caught pressing their bets into a strong quarter, then this stock could easily jump sharply higher post-earnings as the bears move fast to cover some of their positions.

From a technical perspective, Wayfair is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been consolidating and trending sideways over the last two months, with shares moving between $35.40 on the downside and $40.51 on the upside. Any high-volume move above the upper-end of its recent sideways trending chart pattern post-earnings could easily trigger a big breakout trade for shares of Wayfair.

If you're in the bull camp on Wayfair, 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 $40 to its all-time high of $40.51 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 793,377 shares. If that breakout gets started post-earnings, then this stock will set up to enter new all-time-high territory, which is bullish technical price action. Some possible upside targets off that move are $50 to $55, or even $60 to $65 a share.

I would avoid Wayfair 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 $36.03 to $35.50 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 $30 to its 200-day moving average of $28.44 a share.

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