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.

Insys Therapeutics

My first earnings short-squeeze play is specialty pharmaceutical player Insys Therapeutics  (INSY) , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect INSYS Therapeutics to report revenue $66.90 million on earnings of 7 cents per share.

The current short interest as a percentage of the float for INSYS Therapeutics is extremely high at 75.6%. That means that out of the 22.76 million shares in the tradable float, 17.20 million shares are sold short by the bears.

From a technical perspective, INSYS Therapeutics 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 month and change, with shares moving higher off its new 52-week low of $11.45 a share to its recent high of $17.34 a share. During that uptrend, shares of INSYS 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 big breakout trade post-earnings.

If you're bullish on INSYS Therapeutics, 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 $16.32 to $17.34 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 712,446 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 $18.65 to its 200-day moving average of $19.61, or even $21 to $23 a share.

I would simply avoid INSYS Therapeutics 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 $15.27 a share and its 50-day moving average of $14.73 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 its new 52-week low of $11.45 a share.

Fitbit

Another potential earnings short-squeeze trade idea is wearable health and fitness devices provider Fitbit  (FIT - Get Report) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Fitbit to report revenue $578.48 million on earnings of 11 cents per share.

The current short interest as a percentage of the float for Fitbit is extremely high at 34.2%. That means that out of the 127.45 million shares in the tradable float, 43.64 million shares are sold short by the bears.

From a technical perspective, Fitbit is currently trending above its 50-day moving average and well below its 200-day moving average , which is neutral trendwise. This stock has been uptrending over the last month and change, with shares moving higher off its low of $11.65 a share to its recent high of $13.91 a share. During that uptrend, shares of Fitbit 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 in the bull camp on Fitbit, 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 $13.91 to $14.50 a share and then above $14.79 to its gap-down-day high from May at $15.20 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 8.07 million shares. If that breakout fires off post-earnings, then this stock will set up to re-fill some of its previous gap-down-day zone from May that started near $17.50 a share.

I would simply avoid Fitbit or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below both its 50-day moving average of $13.43 a share and its 20-day moving average of $13.22 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 $12.63 to $12, or even its new 52-week low of $11.65 a share.

Community Health Systems

Another potential earnings short-squeeze candidate is general acute care hospitals operator Community Health Systems  (CYH - Get Report) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Community Healthy Systems to report revenue of $4.53 billion on earnings of 56 cents per share.

The current short interest as a percentage of the float for Community Health Systems is very high at 27.2%. That means that out of the 93.48 million shares in the tradable float, 25.47 million shares are sold short by the bears.

From a technical perspective, Community Health Systems 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 $17.60 a share to its recent low of $11.43 a share. During that downtrend, shares of Community Health Systems have been making mostly lower highs and lower lows, which is bearish technical price action.

If you're bullish on Community Health Systems, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 50-day moving average of $13.07 a share and then above more near-term overhead resistance levels at $13.59 to $13.90 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 4.03 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 $15.52 to its 200-day moving average of $17.01, to $17.60 a share.

I would avoid Community Health Systems 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 $12.37 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 levels at $11.43 to its 52-week low of $10.63 a share.

Stone Energy

Another earnings short-squeeze prospect is independent oil and natural gas player Stone Energy  (SGY) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Stone Energy to report revenue of $79.01 million on a loss of $6.44 per share.

The current short interest as a percentage of the float for Stone Energy is extremely high at 47.2%. That means that out of 4.97 million shares in the tradable float, 2.34 million shares are sold short by the bear. The bears have also been increasing their bets from the last reporting period by 16.6%, or by about 334,000 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, Stone Energy is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock has been downtrending badly over the last few weeks, with shares moving lower off its high of $25.50 a share to its intraday low on Monday of $11.07 a share. During that downtrend, shares of Stone Energy have been making mostly lower highs and lower lows, which is bearish technical price action.

If you're bullish on Stone Energy, 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 $12 to $13 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 1.56 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 $14.74 to its 20-day moving average of $15.89, or even $17 a share.

I would simply avoid Stone Energy or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 50-day moving average of $10.25 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 $8 to $7.76, or even $7 a share.

Jamba

My final earnings short-squeeze trading opportunity is Jamba Juice stores owner and operator Jamba  (JMBA) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Jamba to report revenue of $22.65 million on earnings of 19 cents per share.

The current short interest as a percentage of the float for Jamba is very high at 35.4%. That means that out of the 10.71 million shares in the tradable float, 3.80 million shares are sold short by the bears.

From a technical perspective, Jamba is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock has been uptrending over the last month and change, with shares moving higher off its new 52-week low of $9.94 a share to its recent high of $11.07 a share. During that uptrend, shares of Jamba 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 Jamba 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 $11 to $11.07 a share and then above more resistance levels at $11.20 to $11.64 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 83,216 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 its 200-day moving average of $12.43 to $13.60, or even $14 a share.

I would avoid Jamba 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 $10.55 a share to more key near-term support at $10.25 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 $9.94 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.