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.

Rent-A-Center

My first earnings short-squeeze trade idea is rental and leasing services player Rent-A-Center (RCII - Get Report) , which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect Rent-A-Center to report revenue of $686.47 million on a loss of 19 cents per share.

The current short interest as a percentage of the float for Rent-A-Center stands at 31%. That means that out of the 46.48 million shares in the tradable float, 14.42 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 25.1%, or by about 2.89 million 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 rush to cover some of their positions.

From a technical perspective, Rent-A-Center is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last two months, with shares falling sharply lower off its high of $12.30 a share to its new 52-week low of $7.76 a share. During that downtrend, this stock has been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of Rent-A-Center have now started to rebound a bit off that $7.76 low, and it's beginning to trend within range of triggering a near-term breakout trade post-earnings.

If you're bullish on Rent-A-Center, 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 $8.67 a share and then above more near-term overhead resistance levels at $9 to $9.17 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 1.56 million shares. If that breakout hits post-earnings, then this stock will set up to re-fill some of its recent gap-down-day zone that started near $10.50 a share. If that gap gets filled with strong volume, then this stock could easily tag its next major overhead resistance levels at its 200-day moving average of $11.56 a share to $12 a share.

I would simply avoid Rent-A-Center 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 $8.30 to its new 52-week low of $7.76 a share with high volume. If we get that move, then this stock will set up to enter new 52-week-low territory, which is bearish technical price action.

Cloud Peak Energy

Another potential earnings short-squeeze trading opportunity is coal producer Cloud Peak Energy (CLD - Get Report) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Cloud Peak Energy to report revenue of $228.88 million on a loss of 4 cents per share.

The current short interest as a percentage of the float for Cloud Peak Energy is really high at 15.3%. That means that out of the 58.59 million shares in the tradable float, 8.96 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 2.9%, or by about 248,000 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 scramble to cover some of their trades.

From a technical perspective, Cloud Peak Energy is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been consolidating and trending sideways over the last two months and change, with shares moving between $5.01 a share on the downside and $6.65 a share on the upside. Any high-volume move above the upper-end of its recent sideways trending chart pattern post-earnings could trigger a big breakout trade for shares of Cloud Peak Energy.

If you're in the bull camp on Cloud Peak Energy, 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 $6.08 to $6.20 a share and then above more resistance levels at $6.50 to $6.65 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 1.81 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 its 52-week high of $8.04 a share to $8.69, or even $9 to $10 a share.

I would simply avoid Cloud Peak Energy 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 $5.22 to $5 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 $4.25 a share to $4, or even $3.50 a share.

Invitae

Another potential earnings short-squeeze candidate is genetic information player Invitae (NVTA - Get Report) , which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect Invitae to report revenue of $8.82 million on a loss of 73 cents per share.

The current short interest as a percentage of the float for Invitae is pretty high at 12.5%. That means that out of the 17.07 million shares in the tradable float, 2.14 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 4.2%, or by about 86,000 shares. If the bears get caught pressing their bets into a bullish quarter, then this stock could easily rip sharply higher post-earnings as the bears rush to cover some of their positions.

From a technical perspective, Invitae is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been consolidating and trending sideways over the last month and change, with shares moving between $7.95 a share on the downside and $9.59 a share on the upside. Any high-volume move above the upper-end of its recent sideways trending chart pattern post-earnings could trigger a big breakout trade for shares of Invitae.

If you're bullish on Invitae, 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 $9.30 to $9.60 a share and then above some past resistance levels at $9.80 to $9.84 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 475,300 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 $11 to its 52-week high of $11.85 a share, or even $12.50 to $13 a share.

I would avoid Invitae or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below both its 200-day moving average of $8.23 a share and its 50-day moving average of $8.12 a share and then under more key support levels at $8.08 to $7.95 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 $7.50 to $7, or even $6.65 to $6.20 a share.

TripAdvisor

Another earnings short-squeeze prospect is online travel player TripAdvisor (TRIP - Get Report) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect TripAdvisor to report revenue of $326.69 million on earnings of 32 cents per share.

The current short interest as a percentage of the float for TripAdvisor is pretty high at 11%. That means that out of 114.28 million shares in the tradable float, 12.60 million shares are sold short by the bears.

From a technical perspective, TripAdvisor 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 consolidating and trending sideways over the last month and change, with shares moving between around $50 a share on the downside and $53.58 a share on the upside. Any high-volume move above the upper-end of its recent sideways trending chart pattern post-earnings could trigger a big breakout trade for shares of TripAdvisor post-earnings.

If you're bullish on TripAdvisor, 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 $52.17 a share and then above some key near-term overhead resistance levels at $53.47 to $53.58 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 2.10 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 level at its gap-down-day high from last November at $56 a share. Any high-volume move above $56 will then give this stock a chance to re-fill some of that gap-down-day zone that started near $65 a share.

I would simply avoid TripAdvisor 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 $50 to its 50-day moving average of $49.90 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 $46 to its 52-week low of $45.63 a share.

Avis Budget Group

My final earnings short-squeeze trade play is car and truck rentals player Avis Budget Group (CAR - Get Report) , which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Avis Budget Group to report revenue of $1.96 billion on earnings of 17 cents per share.

The current short interest as a percentage of the float for Avis Budget Group is very high at 21.8%. That means that out of the 69.47 million shares in the tradable float, 15.14 million shares are sold short by the bears.

From a technical perspective, Avis Budget Group is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been uptrending a bit over the last month and change, with shares moving higher off its low of $34.91 a share to its recent high of $39.45 a share. During that uptrend, shares of Avis Budget Group have been making mostly higher lows and higher highs, which is bullish technical price action. That uptrend has now started to push shares of Avis Budget Group within range of triggering a big breakout trade post-earnings above some key overhead resistance levels.

If you're in the bull camp on Avis Budget Group 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 $39.45 to $40.23 a share and then above its 52-week high of $41.53 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 1.48 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 $45 to $50, or even $53 to $56 a share.

I would avoid Avis Budget Group 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 $36.39 to $35.50 a share and then below its 200-day moving average of $34.80 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 $32 to $31.75, or even $30.60 a share.

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