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.

Greenbrier

My first earnings short-squeeze trade idea is railroad freight car equipment player Greenbrier (GBX - Get Report) , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Greenbrier Companies to report revenue of $599.53 million on earnings of $1.09 per share.

The current short interest as a percentage of the float for Greenbrier is extremely high at 32.1%. That means that out of the 26.83 million shares in the tradable float, 8.62 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of Greenbrier Companies could easily spike sharply higher post-earnings as the bears rush to cover some of their short positions.

From a technical perspective, Greenbrier Companies 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 a bit over the last few weeks, with shares moving higher off its low of $25.91 a share to its recent high of $30.20 a share. During that uptrend, shares of Greenbrier 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 Greenbrier, then I would wait until after its report and look for long-biased trades if this stock manages to break out above both its 200-day moving average of $29.50 a share and then above more key resistance levels at $30.80 to $31.30 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 537,194 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 $32.50 to $35.50, or even $37 to $39 a share.

I would simply avoid Greenbrier 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 $28 to $27 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 $26 to $24, or even $23 to $22 a share.

WD-40 

Another potential earnings short-squeeze play is maintenance products and home care cleaning products developer WD-40  (WDFC - Get Report) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect WD-40 Company to report revenue $99.30 million on earnings of 86 cents per share.

The current short interest as a percentage of the float for WD-40 Company is notable at 6.7%. That means that out of the 13.83 million shares in the tradable float, 936,000 shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 0.8%, or by about 7,000 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 rush to cover some of their trades.

From a technical perspective, WD-40 Company is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last six months, with shares moving higher off its low of $93.22 a share to its intraday high on Tuesday of $120.50 a share. During that uptrend, shares of WD-40 Company have been making mostly higher lows and higher highs, which is bullish technical price action.

If you're in the bull camp on WD-40 Company, then I would wait until after its report and look for long-biased trades if this stock manages to break above its new 52-week high of $120.50 a share (or above Thursday's intraday high if greater) with high volume. Look for volume on that move that hits near or above its three-month average volume of 99,130 shares. If that breakout materializes 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 $130 to $140, or even $150 a share.

I would simply avoid WD-40 Company 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 $114.97 a share and then below more near-term support at $112 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 $110.64 to its 50-day moving average of $110.40, or even $105 to its 200-day moving average of $101.95 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 Thursday after the market close. Wall Street analysts, on average, expect PriceSmart to report revenue of $706.15 million on earnings of 70 cents per share.

The current short interest as a percentage of the float for PriceSmart sits at 5.4%. That means that out of the 24.24 million shares in the tradable float, 1.32 million shares are sold short by the bears.

From a technical perspective, PriceSmart is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last six months, with shares moving higher off its low of $68.19 a share to its recent low of $94.86 a share. During that uptrend, shares of PriceSmart 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 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 some near-term overhead resistance levels at $94.86 to $95 a share high volume. Look for volume on that move that hits near or above its three-month average action of 129,558 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 $98.04 to $102.73, or even its 52-week high of $103.59 to $110 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 some near-term support levels at $92 to its 20-day moving average of $90.26 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 $88.16 to $87.58, or even $85.60 to its 200-day moving average of $83.55 a share.

Barracuda Networks

Another earnings short-squeeze prospect is security and data protection solutions provider Barracuda Networks  (CUDA) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Barracuda Networks to report revenue of $83.84 million on earnings of 11 cents per share.

The current short interest as a percentage of the float for Barracuda Networks is notable at 5%. That means that out of 22.21 million shares in the tradable float, 1.13 million shares are sold short by the bear.

From a technical perspective, Barracuda Networks is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last three months, with shares moving lower off its high of $18.60 a share to its recent low of $13.91 a share. During that downtrend, shares of Barracuda Networks have been making mostly lower highs and lower lows, which is bearish technical price action.

If you're bullish on Barracuda Networks, 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 $15.07 a share to $15.26, and then above more key resistance levels at $15.92 to its 200-day moving average of $16.29 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 476,298 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 $17 to $17.65, or even $18.60 to $20 a share.

I would simply avoid Barracuda Networks 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 $14.35 to $13.91 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 $13 to $12, or even $11.76 to $11 a share.

MSC Industrial Direct

My final earnings short-squeeze trading opportunity is industrial equipment player MSC Industrial Direct  (MSM - Get Report) , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect MSC Industrial Direct to report revenue of $734.18 million on earnings of $1 per share.

The current short interest as a percentage of the float for MSC Industrial Direct sits at 4.9%. That means that out of the 47.42 million shares in the tradable float, 2.35 million shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a decent short-covering rally post-earnings if MSC Industrial Direct produces the earnings news the bulls are looking for.

From a technical perspective, MSC Industrial Direct is currently trending above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock has been downtrending over the last three months, with shares moving lower off its high of $78.35 a share to its recent low of $67.74 a share. During that downtrend, shares of MSC Industrial Direct have been making mostly lower highs and lower lows, which is bearish technical price action.

If you're in the bull camp on MSC Industrial Direct 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 $71.52 a share to its 20-day moving average of $71.95 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 552,192 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 its 50-day moving average of $73.90 to $74.32, or even $76 to its 52-week high of $78.35 a share.

I would avoid MSC Industrial Direct 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 $67.74 a share to its 200-day moving average of $66.57 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 $62.50 to $60, or even $58 to $56.60 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.