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 can 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 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, 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.

Benefitfocus

My first earnings short-squeeze play is cloud-based benefits management platform provider Benefitfocus (BNFT - Get Report) , which is set to release numbers Thursday after the market close. Wall Street analysts, on average, expect Benefitfocus to report revenue of $62.96 million on a loss of 12 cents per share.

The current short interest as a percentage of the float for Benefitfocus is pretty high, at 13.5%. That means, out of the 21.36 million shares in the tradable float, 2.89 million shares are sold short by the bears.

From a technical perspective, Benefitfocus is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently formed a double-bottom chart pattern, after shares of Benefitfocus found some buying interest at $27 a share over the last two months. This stock has now been trending sideways over that time frame, with shares moving between $32 a share on the upside and $27 a share on the downside.

If you're bullish on Benefitfocus, 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 $30.02 a share and then above more key resistance at $32 a share with high volume. Look for volume on that move to hit near or above its three-month average action of 197,497 shares. If that breakout hits post-earnings, this stock will set up to re-test or possibly take out its next major overhead resistance levels at $34 to its 200-day moving average of $35.46 a share, or even $38 to $40 a share.

I would simply avoid Benefitfocus 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 $27.95 to $27 a share with high volume. If we get that move, this stock will set up to re-test or possibly take out its next major support levels at $25.40 to its 52-week low of $24.55 a share, or even $22 to $21 a share.

Carrizo Oil & Gas

Another potential earnings short-squeeze trade idea is independent oil and gas player Carrizo Oil & Gas (CRZO - Get Report) , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Carrizo Oil & Gas to report revenue of $152.69 million on earnings of 31 cents per share.

The current short interest as a percentage of the float for Carrizo Oil & Gas is pretty high, at 13.6%. That means, out of the 61.51 million shares in the tradable float, 8.42 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 7.6%, or by about 594,000 shares. If the bears get caught pressing their bets into a strong quarter, this stock could easily spike sharply higher post-earnings as the bears rush to cover some of their positions.

From a technical perspective, Carrizo Oil & Gas 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 and change, with shares falling sharply off its high of $43.96 to its recent low of $32.25. During that downtrend, shares of Carrizo Oil & Gas have been consistently making lower highs and lower lows, which is bearish technical price action.

If you're in the bull camp on Carrizo Oil & Gas, 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 $34.53 a share and then above more near-term resistance levels at $35 to $35.50 with high volume. Look for volume on that move to hit near or above its three-month average action of 474,803 shares. If that breakout fires off post-earnings, 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 $36.54 a share to its 200-day moving average of $37 a share, or even $39.50 to $40 a share.

I would simply avoid Carrizo Oil & Gas 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 $32.25 to $32 a share with high volume. If we get that move, this stock will set up to re-test or possibly take out its next major support levels at $29.50 to $27.50, or even $25 a share.

Sturm, Ruger & Company

Another potential earnings short-squeeze candidate is firearm maker Sturm, Ruger & Company (RGR - Get Report) , which is set to release numbers Wednesday after the market close. Wall Street analysts, on average, expect Sturm, Ruger & Company to report revenue of $167.40 million on earnings of 91 cents per share.

The current short interest as a percentage of the float for Sturm, Ruger & Company is extremely high at 24.2%. That means, out of the 18.46 million shares in the tradable float, 4.47 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 6.8%, or by about 285,000 shares. If the bears get caught pressing their bets into a bullish quarter, this stock could easily rip sharply higher post-earnings as the bears run to cover some of their trades.

From a technical perspective, Sturm, Ruger & Company is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently formed a double-bottom chart pattern, after shares found some buying interest at $48.50 to $48.35 a share over the last few weeks. Following that potential bottom, this stock has now started to spike modestly higher and trend within range of triggering a near-term breakout trade post-earnings.

If you're bullish on Sturm, Ruger & Company, 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 $50.30 to $50.85 a share and then above its 50-day moving average of $51.67 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 336,803 shares. If that breakout triggers post-earnings, this stock will set up to re-test or possibly take out its next major overhead resistance levels at $53 to $54.50, or even $55 to $57 a share.

I would avoid Sturm, Ruger & Company 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 $48.35 to $46.60 a share with high volume. If we get that move, this stock will set up to re-test or possibly take out its next major support levels at $42.50 to $40, or even $38 a share.

Boston Beer Company

Another earnings short-squeeze prospect is alcohol beverages producer Boston Beer Company (SAM - Get Report) , which is set to release numbers Wednesday after the close. Wall Street analysts, on average, expect Boston Beer Company to report revenue of $214.42 million on earnings of $1.22 per share.

The current short interest as a percentage of the float for Boston Beer Company is extremely high, at 21.2%. That means, out of 7.92 million shares in the tradable float, 1.68 million are sold short by the bear.

From a technical perspective, Boston Beer 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 month, with shares moving higher off its low of $151.70 a share to its recent high of $172.15 a share. During that uptrend, shares of Boston Beer Company have been consistently making higher lows and higher highs, which is bullish technical price action.

If you're bullish on Boston Beer Company, 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 $172.15 to 175.60 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 136,695 shares. If that breakout fires off post-earnings, this stock will set up to re-test or possibly take out its next major overhead resistance levels at $180.45 to $185, or even $190 to $195 a share.

I would simply avoid Boston Beer Company or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 200-day moving average of $165.92 a share to its 50-day moving average of $163.33 a share with high volume. If we get that move, this stock will set up to re-test or possibly take out its next major support levels at its 20-day moving average of $159.92 a share to $155, or even $152 a share.

Kohl's

My final earnings short-squeeze trading opportunity is department stores operator Kohl's (KSS - Get Report) , which is set to release numbers Thursday before the market open. Wall Street analysts, on average, expect Kohl's to report revenue of $6.22 billion on earnings of $1.33 per share.

Kohl's is a holding in our Dividend Stock Advisor portfolio. Learn more now.

The current short interest as a percentage of the float for Kohl's stands at 11.8%. That means, out of the 175.23 million shares in the tradable float, 20.84 million are sold short by the bears.

From a technical perspective, Kohl's is currently trending below both its 50- and 200-day moving averages, which is bearish. This stock has been trending sideways and consolidating over the last two months, with shares moving between $44 on the upside and $38.48 on the downside. Any high-volume move above the upper-end of that recent sideways trending chart pattern post-earnings could trigger a big breakout trade for shares of Kohl's.

If you're in the bull camp on Kohl's, 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 $42.70 a share and then above more near-term resistance at $43.45 to $44 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 4.50 million shares. If that breakout materializes post-earnings, this stock will set up to re-fill some of its recent gap-down-day zone that started near $52 a share.

I would avoid Kohl's 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 $40.78 a share and more near-term support levels at $39.01 to $38.48 a share with high volume. If we get that move, this stock will set up to re-test or possibly take out its next major support levels at $35 to its 52-week low of $33.87 a share.

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