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.

Straight Path Communications

My first earnings short-squeeze trade idea is technology player Straight Path Communications (STRP) , which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect Straight Path Communications to report a loss of 11 cents per share.

The current short interest as a percentage of the float for Straight Path Communications is extremely high at 41.9%. That means that out of the 6.51 million shares in the tradable float, 2.73 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 5.7%, or by about 147,000 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 positions.

From a technical perspective, Straight Path Communications is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock recently formed a double bottom chart pattern, after shares found some buying interest at $22.09 to $22.60 a share over the last month. Following that potential bottom, this stock has now started to trend upwards a bit and move back above both its 20-day and 50-day moving averages. That uptrend is now quickly pushing shares of Straight Path Communications within range of triggering a big breakout trade post-earnings.

If you're bullish on Straight Path Communications, 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 $28.36 a share and then above more near-term resistance levels at $29 to $29.20 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 123,542 shares. If that breakout hits post-earnings, then this stock will set up to retest or possibly take out its next major overhead resistance levels at $32 to $35, or even $40 a share.

I would simply avoid Straight Path Communications or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below those recent double bottom support levels with high volume. If we get that move, then this stock will set up to retest or possibly take out its next major support levels at $20.65 to $20, or even $17 a share.

VeriFone Systems

Another potential earnings short-squeeze play is electronic payments solutions player VeriFone Systems (PAY) , which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect VeriFone Systems to report revenue of $461.30 million on earnings of 29 cents per share.

The current short interest as a percentage of the float for VeriFone Systems stands at 8.3%. That means that out of the 110.37 million shares in the tradable float, 9.21 million shares are sold short by the bears.

From a technical perspective, VeriFone Systems is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock recently formed a double bottom chart pattern, after shares found some buying interest at $14.94 to $15.10 a share over the last three months. Following that potential bottom, this stock has now started to trend upward a bit and move back above its 50-day moving average. That move has now pushed shares of VeriFone Systems within range of triggering a big breakout trade post-earnings above some key overhead resistance levels.

If you're in the bull camp on VeriFone Systems, then I would wait until after its report and look for long-biased trades if this stock manages to break out above the 20-day moving average of $16.99 a share and then above more near-term support levels at $17.25 to $17.92 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 2.28 million shares. If a breakout triggers post-earnings, then this stock will set up to refill some of its previous gap-down-day zone from September that started near $20 a share.

I would simply avoid VeriFone Systems or look for short-biased trades if after earnings it fails to trigger the breakout and then drops back below those recent double bottom support levels with high volume. If we get that move, then this stock will set up to enter new 52-week-low territory below $14.94 a share, which is bearish technical price action.

Landauer

Another potential earnings short-squeeze candidate is technology player Landauer (LDR) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Landauer to report revenue of $38 million on earnings of 42 cents per share.

The current short interest as a percentage of the float for Landauer is notable at 5.4%. That means that out of the 9.4 million shares in the tradable float, 511,000 shares are sold short by the bears.

From a technical perspective, Landauer 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 the recent low of $41 a share to its recent high of $53.45 a share. During that uptrend, shares of Landauer have been making mostly higher lows and higher highs, which is bullish technical price action. That uptrend has now pushed this stock within range of triggering a big breakout trade post-earnings above some key overhead resistance levels.

If you're bullish on Landauer, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 52-week high of $53.45 a share and then above some past overhead resistance at $56.79 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 45,266 shares. If that breakout develops 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 $60 to $65, or even $70 a share.

I would avoid Landauer 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 $50.71 a share with high volume. If we get that move, then this stock will set up to retest or possibly take out its next major support levels at $47.40 to its 50-day moving average of $46.63 a share, or even $43 to $41 a share.

Apogee Enterprises

Another earnings short-squeeze prospect is industrial goods 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 $274.58 million on earnings of 77 cents per share.

The current short interest as a percentage of the float for Apogee Enterprises is very high at 17.2%. That means that out of 28.19 million shares in the tradable float, 4.85 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 been uptrending strong over the last month and change, with shares moving higher off its low of $39.88 a share to its recent high of $51.31 a share. During that uptrend, shares of Apogee Enterprises have been making mostly higher lows and higher highs, which is bullish technical price action. That uptrend has now pushed this stock within range of triggering a near-term breakout trade post-earnings above some key overhead resistance levels.

If you're bullish on Apogee Enterprises, then I would wait until after its report and look for long-biased trades if the stock manages to break out above some near-term overhead resistance levels at the 52-week high of $51.31 a share to $53.69 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 283,288 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 $57.50 to $60, or even $65 to $70 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 $48.02 a share with high volume. If we get that move, then this stock will set up to retest or possibly take out its next major support levels at its 50-day moving average of $44.93 a share to its 200-day moving average of $44.51 a share, or even $43 to $41 a share.

ABM Industries

My final earnings short-squeeze trading opportunity is integrated facility solutions provider ABM Industries (ABM - Get Report) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect ABM Industries to report revenue of $1.33 billion on earnings of 50 cents per share.

The current short interest as a percentage of the float for ABM Industries sits at 2.4%. That means that out of the 52.78 million shares in the tradable float, 1.30 million shares are sold short by the bears.

From a technical perspective, ABM Industries 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 the low of $37.60 a share to the recent high of $45.03 a share. During that uptrend, this stock has been making mostly higher lows and higher highs, which is bullish technical price action. That uptrend has now pushed shares of ABM Industries within range of triggering a big breakout trade post-earnings above some key overhead resistance levels.

If you're in the bull camp on ABM Industries 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 $44.26 to its 52-week high of $45.03 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 280,655 shares. If that breakout hits 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 $50 to $55, or even $60 to $65 a share.

I would avoid ABM Industries 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 $42.57 to the 50-day moving average of $40.71 a share with high volume. If we get that move, then this stock will set up to retest or possibly take out its next major support levels at $38 to $37.50, or even its 200-day moving average of $36.40 a share.

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