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 to my subscribers 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 trade idea is used vehicles retailer CarMax  (KMX - Get Report) , which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect CarMax to report revenue $4.2 billion on earnings of 92 cents per share.

The current short interest as a percentage of the float for CarMax is very high at 16.6%. That means that out of the 192.69 million shares in the tradable float, 32.05 million shares are sold short by the bears.

From a technical perspective, CarMax is currently trending above 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 $47.87 a share to its intraday high on Monday of $51.47 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 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 break out above some near-term overhead resistance levels at its 50-day moving average of $52.06 a share to its 200-day moving average of $52.91 a share and then above more key resistance levels at $53.50 to $54.60 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 2.64 million 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 $56 to $60, or even $66 to its 52-week high of $70.88 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 near-term support levels at $47.87 to $47 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 $43.50 to $41 a share.

Lennar

Another potential earnings short-squeeze play is homebuilding player Lennar  (LEN - Get Report) , which is set to release numbers on Tuesday before the market open. There are currently no analysts' estimates available for Lennar.

The current short interest as a percentage of the float for Lennar is pretty high at 9.1%. That means that out of the 188.74 million shares in the tradable float, 17.34 million shares are sold short by the bears. If this company can produce the earnings news the bulls are looking for, then shares of Lennar could easily rip sharply higher post-earnings as the bears move fast to cover some of their positions.

From a technical perspective, Lennar 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 and change, with shares moving higher off its low of $42.93 a share to its recent high of $47.92 a share. During that uptrend, shares of Lennar 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 big breakout trade post-earnings.

If you're in the bull camp on Lennar, then I would wait until after its report and look for long-biased trades if this stock manages to break above some near-term overhead resistance levels at $47.92 to $48.92 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 2.24 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 $52.40 to $54, or even its 52-week high of $56.04 a share.

I would simply avoid Lennar 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 50-day moving average of $45.88 a share to more key support at $45.01 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its next major support levels at $42.93 to $40, or even $37 a share.

Actuant

Another potential earnings short-squeeze candidate is industrial products and systems player Actuant  (ATU - Get Report) , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Actuant to report revenue of $294.23 million on earnings of 37 cents per share.

The current short interest as a percentage of the float for Actuant stands at 10.9%. That means that out of the 57.01 million shares in the tradable float, 6.21 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 11.1%, or by about 618,000 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 positions.

From a technical perspective, Actuant is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong over the last six months, with shares moving higher off its low of $20.49 a share to its intraday high on Monday of $27.71 a share. During that uptrend, this stock has been making mostly higher lows and higher highs, which is bullish technical price action.

If you're bullish on Actuant, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some past overhead resistance levels at $28 to $29 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 495,875 shares. If that breakout takes hold post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $32 to $34, or even $36 to $37 a share.

I would avoid Actuant 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 50-day moving average of $26.21 a share to more key support levels at $25.22 to $24.86 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 200-day moving average of $23.44 to $22, or even $20 a share.

Commercial Metals

Another earnings short-squeeze prospect is basic materials player Commercial Metals  (CMC - Get Report) which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Commercial Metals to report revenue of $1.15 billion on earnings of 26 cents per share.

The current short interest as a percentage of the float for Commercial Metals is pretty high at 13.1%. That means that out of 113.42 million shares in the tradable float, 14.91 million shares are sold short by the bear.

From a technical perspective, Commercial Metals is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong over the last six months, with shares moving higher off its low $12.35 a share to its recent high of $18.50 a share. During that uptrend, shares of Commercials Metals 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 big breakout trade post-earnings.

If you're bullish on Commercial Metals, 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 $18.36 a share to its 52-week high of $18.50 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 1.68 million 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 a share. Any high-volume move above $20 will then give this stock a chance at tagging $23 to $$25 a share.

I would simply avoid Commercial Metals 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 $16.97 to $16.02 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 200-day moving average of $15.28 to $14.50, or even $13.50 to $12 a share.

Apogee Enterprises

My final earnings short-squeeze trading opportunity is general building 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 $247.18 million on earnings of 49 cents per share.

The current short interest as a percentage of the float for Apogee Enterprises is pretty high at 11.6%. That means that out of the 27.96 million shares in the tradable float, 3.26 million shares are sold short by the bears.

From a technical perspective, Apogee Enterprises is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has recently started to spike higher off its 50-day moving average of $43.32 a share with some decent upside volume flows. That high-volume spike is now quickly pushing shares of Apogee Enterprises within range of triggering a big breakout trade post-earnings above some key near-term overhead resistance levels.

If you're in the bull camp 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 $46.44 to $46.46 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 256,594 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 $52 to $54, or even $58 to its 52-week high of $60.99 a share.

I would avoid Apogee Enterprises 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 50-day moving average of $43.32 a share to $42.66 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 $39.36 to $37 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.