Stock Quotes in this Article: ABMD, GMCR, HAIN, RLD, JIVE

WINDERMERE, Fla. (Stockpickr) -- 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.

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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 technically very bullish 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 The Street doesn’t like the numbers or guidance.

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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, here’s a look at several stocks that could experience big short squeezes when they report earnings this week.

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Hain Celestial Group

My first earnings short-squeeze trade idea is natural and organic products maker Hain Celestial Group (HAIN), which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Hain Celestial Group to report revenue of $473.44 million on earnings of 69 cents per share.

This company has beaten Wall Street estimates for the last four quarters and is coming off a quarter in which it beat estimates by 1 cent, reporting net income of 40 cents per share vs. a mean estimate of 39 cents per share. Hain Celestial Group has averaged year-over-year revenue growth of 25.5% over the last four quarters.

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The current short interest as a percentage of the float for Hain Celestial Group is rather high at 11.9%. That means that out of the 37.53 million shares in the tradable float, 5.34 million shares are sold short by the bears. Any bullish earnings news could easily spark a solid short-covering rally for HAIN post-earnings.

From a technical perspective, HAIN 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 slightly over the last month, with shares moving higher from its low of $51.51 to its recent high of $58.76 a share. During that uptrend, shares of HAIN have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of HAIN within range of triggering a near-term breakout trade post-earnings.

If you’re bullish on HAIN, 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 at $58.76 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 814,568 shares. If that breakout triggers, then HAIN will set up to re-test or possibly take out its next major overhead resistance levels at $62 to $62.40 a share. Any high-volume move above $62.40 will then put $64 to $66 into focus for shares of HAIN.

I would simply avoid HAIN 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 $56.49 a share with heavy volume. If we get that move, then HAIN will set up to re-test or possibly take out its next major support levels at $53.44 to $51.51 a share. If those levels get taken out with volume, then HAIN could hit $49.63 a share or lower post-earnings.

Jive Software

Another potential earnings short-squeeze play is social business software platform provider Jive Software (JIVE), which is set to release its numbers on Tuesday after the market close. Wall Street analysts, on average, expect Jive Software to report revenue of $31.15 million on a loss of 15 cents per share.

Just this morning, Credit Suisse reccomended Jive Software as a buy, with a $20 price target, ahead of its earnings report.

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The current short interest as a percentage of the float for Jive Software is extremely high at 29.9%. That means that out of the 27.02 million shares in the tradable float, 6.27 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 4.9%, or by about 293,000 shares. If the bears are caught pressing their bets into a strong quarter, then we could easily see a big short-squeeze develop post-earnings.

From a technical perspective, JIVE 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 strong for the last three months, with shares soaring from its low of $10.63 to its recent high of $15.86 a share. During that uptrend, shares of JIVE have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of JIVE within range of triggering a major breakout trade post-earnings.

If you’re in the bull camp on JIVE, 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 $15.80 to $15.86 a share and then once it clears its 200-day moving average at $16.36 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 660,403 shares. If that breakout triggers, then JIVE will set up to re-fill some of its previous gap down zone from last August that started near $19.89 a share.

I would simply avoid JIVE or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 50-day at $14.46 and more support levels at $14.28 to $13.86 a share with high volume. If we get that move, then JIVE will set up to re-test or possibly take out its next major support levels at $13 to $12.76 a share.

Green Mountain Coffee Roasters

One potential earnings short-squeeze candidate is specialty coffee and coffee maker player Green Mountain Coffee Roasters (GMCR), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Green Mountain Coffee Roasters to report revenue of $1.33 billion on earnings of 65 cents per share.

Last week, Longbow said that after conducting checks, the demand growth for Keurig brewers and K-Cups either held firm or accelerated through the end of the latest peak holiday season at most of the retailers contacted by the firm. The firm added that private label single-serve coffee offerings failed to gain traction at the retailers with whom it spoke, and it now has increased confidence in its above-consensus estimates for Green Mountain Coffee Roasters. The firm maintained its buy rating on the stock.

The current short interest as a percentage of the float for Green Mountain Coffee Roasters is extremely high at 25.6%. That means that out of the 128.70 million shares in the tradable float, 31.01 million shares are sold short by the bears. Any bullish earnings news could easily set off a monster short-squeeze for GMCR post-earnings.

From a technical perspective, GMCR is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last two months, with shares soaring high from around $34 to its recent high of $47.62 a share. During that uptrend, shares of GMCR have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of GMCR within range of triggering a near-term breakout trade post-earnings.

If you’re bullish on GMCR, 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 $47.62 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 5.3 million shares. If that breakout triggers, then GMCR will set up to re-fill some of its previous gap down zone from last May that started at $50.05 a share. Any high-volume move above $50.05 will then put $60 into range for shares of GMCR.

I would avoid GMCR 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 $43.04 to $40.04 a share with high volume. If we get that move, then GMCR will set up to re-test or possibly take out its next major support levels at $38.83 to $37.20 a share.

AbioMed

Another earnings short-squeeze play is cardiac support systems developer AbioMed (ABMD), which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect AbioMed to report revenue of $38.04 million on earnings of 7 cents per share.

The current short interest as a percentage of the float for AbioMed is extremely high at 21.1%. That means that out of the 34.72 million shares in the tradable float, 7.61 million shares are sold short by the bears. This is a low float high short interest situation, so any bullish earnings news could easily send shares of ABMD soaring higher as the bears rush to cover some of their bearish bets.

From a technical perspective, ABMD 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 trending sideways during the last three months, with shares moving between $14.94 on the upside and $11.80 on the downside. Shares of ABMD have recently pushed back above its 50-day moving average of $13.30 a share and its now quickly moving within range of breaking out above the upper-end of its recent sideways chart pattern.

If you’re bullish on ABMD, 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 $14.13 to $14.94 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 941,987 shares. If that breakout triggers, then AMBD will set up to re-test or possibly take out its next major overhead resistance level at around $16 a share. Any high-volume move above $16 will then give ABMD a chance to re-fill some of its previous gap down zone from last November that started at $20 a share.

I would avoid ABMD 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 $13.30 a share and then below some more support at $13 a share with high volume. If we get that move, then ABMD will set up to re-test or possibly take out its next major support levels at $11.96 to $11.80 a share. Any move below $11.80 a share should be considered very bearish, since it will push shares of ABMD into new 52-week low territory.

RealD

My final earnings short-squeeze trade idea is licensor of 3D technologies RealD (RLD), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect RealD to report revenue of $47.78 million on a loss of 9 cents per share.

If you’re looking for a heavily-shorted stock that’s been uptrending strong heading into its quarter, then make sure to check out shares of RLD. This stock has been on fire during the last three months, with shares up a solid 18.7%.

The current short interest as a percentage of the float for RealD is very high at 22%. That means that out of the 39.89 million shares in the tradable float, 9.34 million shares are sold short by the bears. This is another name that’s a high short interest low float situation. Any bullish earnings news could easily send the bears scrambling to cover some of their short bets, pushing shares of RLD significantly higher post-earnings.

From a technical perspective, RLD is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last four months, with shares soaring higher from its low of $8.57 to its recent high of $11.74 a share. During that uptrend, shares of RLD have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of RLD within range of triggering a major breakout trade post-earnings.

If you’re in the bull camp on RLD, 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 $11.74 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 326,989 shares. If we get that breakout, then RLD will set up to re-fill some of its previous gap down zone from last August that started near $13 a share. Any high-volume move above $13 will then put $14 to $15.42 into range for shares of RLD.

I would simply avoid RLD or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 200-day at $10.95 and its 50-day at $10.79 a share with high volume. If we get that move, then RLD will set up to re-test or possibly take out its next major support levels at $10.57 to $10.22 a share. Any move below $10.22 will then put $10.13 to $9.80 into focus for shares of RLD.

To see more potential earnings short squeeze plays, check out the Earnings Short Squeeze Plays portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.


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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.