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.

JD.com

My first earnings short-squeeze play is China-based online direct sales player JD.com  (JD - Get Report) , which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect JD.com to report revenue of $51.90 billion on a loss of 12 cents per share.

The current short interest as a percentage of the float for JD.com is notable at 8.7%. That means that out of the 474.92 million shares in the tradable float, 41.67 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 12.9%, or by about 4.75 million shares. If the bears get caught pressing their bets into a bullish quarter, then this stock could easily soar sharply higher post-earnings as the bears rush to cover some of their positions.

From a technical perspective, JD.com is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending a bit over the last few weeks, with shares moving higher off its low of $22.14 to its high of $26.47 a share. During that uptrend, shares of JD.com have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed this stock within range of triggering a near-term breakout trade post-earnings.

If you're bullish on JD.com, 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 $26 to $26.47 a share and then above its 50-day moving average of $27.41 a share high volume. Look for volume on that move that hits near or above its three-month average action of 11.95 million shares. If that breakout kicks off post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $29 to its 200-day moving average of $29.50, or even $31 to $33 a share.

I would simply avoid JD.com or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below both its 20-day moving average of $24.66 to some more near-term support at $24.30 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 $22.14 to its 52-week low of $21.55 a share.

Workiva

Another potential earnings short-squeeze trade idea is application software player Workiva  (WK - Get Report) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Workiva to report revenue $37.99 million on a loss of 24 cents per share.

The current short interest as a percentage of the float for Workiva is notable at 8%. That means that out of the 18.65 million shares in the tradable float, 1.49 million shares are sold short by the bears. If this company can deliver the earnings news the bulls are looking for, then shares of Workiva could easily rip sharply higher post-earnings as the bears move fast to cover some of their positions.

From a technical perspective, Workiva is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending a bit over the last few weeks, with shares moving higher off its low of $10.91 to its recent high of $12.67 a share. During that uptrend, this stock has been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of Workiva within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on Workiva, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 20-day moving average of $12.43 a share and then above more key near-term support at $12.67 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 72,469 shares. If that breakout fires off post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $14.50 to its 50-day moving average of $14.89, or even its 200-day moving average of $15.13 to $15.30 a share.

I would simply avoid Workiva 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 $12 to $11.46 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 level at its new all-time low of $10.91 a share.

Pure Storage

Another potential earnings short-squeeze candidate is enterprise data storage platform provider Pure Storage  (PSTG - Get Report) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Pure Storage to report revenue of $136.63 million on a loss of 16 cents per share.

The current short interest as a percentage of the float for Pure Storage is extremely high at 67%. That means that out of the 27.37 million shares in the tradable float, 18.34 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 7.5%, or by about 1.27 million shares. If the bears get caught pressing their bets into a strong quarter, then this stock could easily surge sharply higher post-earnings as the bears run to cove some of their positions.

From a technical perspective, Pure Storage is currently trending above 20-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been uptrending a bit over the last few weeks, with shares moving higher off its all-time low of $11.05 to its recent high of $14 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 this stock within range of triggering a big breakout trade post-earnings.

If you're bullish on Pure Storage, 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 $13.84 to its 50-day moving average of $13.93 a share and then above more key resistance levels at $14 to $14.36 and $14.81 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 1.25 million 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 $17 to $17.95, or even $18.39 to $19.50 a share.

I would avoid Pure Storage 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 $12.63 a share to more near-term support at $12.18 to $12 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 level at its new all-time low of $11.05 a share.

Revance Therapeutics

Another earnings short-squeeze prospect is clinical-stage specialty biopharmaceutical stock Revance Therapeutics  (RVNC - Get Report) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Revance Therapeutics to report revenue of $100,000 on a loss of 86 cents per share.

The current short interest as a percentage of the float for Revance Therapeutics is pretty high at 15.5%. That means that out of 19.96 million shares in the tradable float, 3.09 million shares are sold short by the bear. The bears have also been increasing their bets from the last reporting period by 2%, or by about 61,000 shares. If the bears get caught pressing their bets into a strong quarter, then this stock could easily rip sharply higher post-earnings as the bears scramble to cover some of their trades.

From a technical perspective, Revance Therapeutics is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending a bit over the last few weeks, with shares moving higher off its low of $16.01 to its recent high of around $20 a share. During that uptrend, shares of Revance Therapeutics have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed this stock within range of triggering a major breakout trade post-earnings.

If you're bullish on Revance Therapeutics, 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 $19.43 to $20 a share and then above more key resistance levels at $20.64 to around $21.50 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 367,444 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 its 50-day moving average of $24.92 to $25.50, or even around $28 a share.

I would simply avoid Revance Therapeutics 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 $18 to $17.43 a share and then below its recent low of $16.01 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its 52-week low of $14.10 a share to its all-time low of $14.02 a share.

Habit Restaurants

My final earnings short-squeeze play is fast casual restaurants operator Habit Restaurants  (HABT - Get Report) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Habit Restaurants to report revenue of $60.75 million on earnings of 4 cents per share.

The current short interest as a percentage of the float for Habit Restaurants is extremely high at 54.4%. That means that out of the 10.80 million shares in the tradable float, 5.88 million shares are sold short by the bears. If this company can deliver the earnings news the bulls are looking for, then shares of Habit Restaurants could easily spike sharply higher post-earnings as the bears move fast cover some of their positions.

From a technical perspective, Habit Restaurants is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending over the last few weeks, with shares moving higher off its low of $17.65 to its intraday high on Monday of $20.98 a share. During that uptrend, shares of Habit Restaurants have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed this stock within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on Habit Restaurants, 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 $20.98 to its 50-day moving average of $21.45 a share and then above more resistance at $22.21 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 266,913 shares. If that breakout triggers post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $23 to $24.50, or even $24.75 to its 200-day moving average of $26.02 a share.

I would avoid Habit Restaurants 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 $20 to its 20-day moving average of $19.63 a share and then below more support at $19 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 level at its new 52-week low of $17.65 a share.

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