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.

Short-squeeze candidates are something that I tweet about on a regular basis. These are also the exact type of stocks that I love to trade and alert in real-time.

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.

CarMax

My first earnings short-squeeze play is used vehicles retailer CarMax  (KMX - Get Report) , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect CarMax to report revenue $3.68 billion on earnings of 71 cents per share.

The current short interest as a percentage of the float for CarMax is very high at 16%. That means that out of the 194.55 million shares in the tradable float, 31.19 million shares are sold short by the bears. If this company can produce the earnings news the bulls are looking for, then shares of CarMax can spike sharply higher post-earnings as the bears rush to cover some of their positions.

From a technical perspective, CarMax is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been uptrending over the last two months, with shares moving higher off its new 52-week low of $41.25 a share to its recent high of $53.22 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 CarMax within range of triggering a near-term breakout trade post-earnings.

If you're bullish on CarMax, then I would wait until after its report and look for long-biased trades if this stock manages to take out some near-term overhead resistance levels at $51.78 to $53.22 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 3.27 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 $55 to its 200-day moving average of $56.30, or even $60 to $63 a share.

I would simply avoid CarMax 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 20-day moving average of $50.45 a share to around $49 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 its 50-day moving average of $47.37 to $47, or even $44 to $43 a share.

Ollie's Bargain Outlet

Another potential earnings short-squeeze trade idea is brand name products retailer Ollie's Bargain Outlet  (OLLI - Get Report) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Ollie's Bargain Outlet to report revenue $239.06 million on earnings of 28 cents per share.

The current short interest as a percentage of the float for Ollie's Bargain Outlet is extremely high at 25.1%. That means that out of the 17.87 million shares in the tradable float, 4.49 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 5.9%, or by about 251,000 shares. If the bears get caught pressing their bets into a bullish quarter, then this stock could easily spike sharply higher post-earnings as the bears scramble to cover some of their positions.

From a technical perspective, Ollie's Bargain Outlet is currently trending above both its 20-day and 50-day moving averages, which is bullish. This stock has been uptrending strong over the last six months, with shares moving sharply higher off its low of $14.88 a share to its recent high of $24 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 Ollie's Bargain Outlet within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on Ollie's Bargain Outlet, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its all-time high of $24 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 544,510 shares. If that breakout materializes post-earnings, then this stock will set up to enter new all-time-high territory, which is bullish technical price action.

I would simply avoid Ollie's Bargain Outlet or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back some near-term support levels at $22.50 a share to its 20-day moving average of $22.19 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 levels at its 50-day moving average of $21.28 to around $19 to $18 a share.

PriceSmart

Another potential earnings short-squeeze candidate is membership shopping warehouse clubs operator PriceSmart  (PSMT - Get Report) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect PriceSmart to report revenue of $775.12 million on earnings of 88 cents per share.

The current short interest as a percentage of the float for PriceSmart is rather high at 7.3%. That means that out of the 23.95 million shares in the tradable float, 1.76 million shares are sold short by the bears.

From a technical perspective, PriceSmart is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been uptrending strong over the last two months, with shares moving higher off its low of $68.19 a share to its recent high of $86.48 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 PriceSmart within range of triggering a big breakout trade post-earnings above some near-term overhead resistance levels.

If you're bullish on PriceSmart, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 200-day moving average of $84.73 a share and then above more near-term overhead resistance levels at $85.56 to $86.60 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 159,926 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 $92 to $94, or even $98 to $100 a share.

I would avoid PriceSmart 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 $82.81 a share to some more near-term support at $80.02 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 its 50-day moving average of $78.27 to $74, or even $71.50 a share.

Apogee Enterprises

Another earnings short-squeeze prospect is general buildings materials player Apogee Enterprises  (APOG - Get Report) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Apogee Enterprises to report revenue of $259.15 million on earnings of 64 cents per share.

The current short interest as a percentage of the float for Apogee Enterprises is notable at 8.5%. That means that out of 28.09 million shares in the tradable float, 2.39 million shares are sold short by the bear.

From a technical perspective, Apogee Enterprises is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been uptrending over the last two months, with shares moving higher off its new 52-week low of $33.67 a share to its recent high of $45.54 a share. During that uptrend, shares of Apogee Enterprises 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 near-term breakout trade post-earnings.

If you're bullish on Apogee Enterprises, 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 $44.70 to $45.54 a share and then above its 200-day moving average of $47.13 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 251,658 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 $51 to $52, or even $54 a share.

I would simply avoid Apogee Enterprises 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 $42.55 a share to more near-term support at $42 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 its 50-day moving average of $39.81 a share to around $37 to $35 a share.

Duluth Holdings

My final earnings short-squeeze trading opportunity is apparel and accessories retailer Duluth Holdings  (DLTH - Get Report) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Duluth Holdings to report revenue of $133.21 million on earnings of 28 per share.

The current short interest as a percentage of the float for Duluth Holdings stands at 8.2%. That means that out of the 18.02 million shares in the tradable float, 709,000 shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 17.6%, or by about 106,000 shares. If the 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 trades.

From a technical perspective, Duluth Holdings is currently trending above its 20-day and 50-day moving averages, which is bullish. This stock has been uptrending strong over the last two months, with shares moving higher off its low of $14 a share to its recent high of $20.60 a share. During that uptrend, shares of Duluth Holdings 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 Duluth Holdings, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its all-time high of $20.60 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 142,676 shares. If that breakout takes hold 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 $25 to $30 a share.

I would avoid Duluth Holdings 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 its 20-day moving average of $19 a share to more support levels at $18.50 to $18 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 its 50-day moving average of $17.20 to $16 a share.

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