Stock Quotes in this Article: BSFT, FSLR, GMCR, SODA, TRIP

MADISON, Wis. (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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First Solar

My first earnings short-squeeze trade idea is solar module maker First Solar (FSLR), which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect First Solar to report revenue of $725.26 million on earnings of 75 cents per share.

Over the last four quarters, revenue for First Solar has trended higher by 28.4% on average year-over-year. The largest increase came in the second quarter of the last fiscal year, when revenue soared 79.7% from the year-earlier period.

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The current short interest as a percentage of the float for First Solar is extremely high at 30.6%. That means that out of the 60.40 million shares in the tradable float, 18.43 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 12.2%, or by about 2 million shares. If the bears are caught pressing their bets into a strong quarter, then shares of FSLR could soar higher post-earnings.

From a technical perspective, FSLR 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 higher from its low of $24.26 to its recent high of $47.46 a share. During that uptrend, shares of FSLR have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of FSLR within range f triggering a major breakout trade post-earnings.

If you're bullish on FSLR, 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 $47.46 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 6.93 million shares. If that breakout hits, then FSLR will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $55 to $60 a share, or even $65 a share.

I would simply avoid FSLR 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 $44.11 a share with high volume. If we get that move, then FSLR will set up to re-test or possibly take out its next major support levels at $40 to $36 a share.

TripAdvisor

Another potential earnings short-squeeze play is online travel research player TripAdvisor (TRIP), which is set to release its numbers on Tuesday after the market close. Wall Street analysts, on average, expect TripAdvisor to report revenue of $223.76 million on earnings of 46 cents per share.

If you're looking for a stock that's a favorite target of the short-sellers that's trending very strong heading into its earnings report this week, then make sure to keep an eye on shares of TripAdvisor. This stock has been on fire so far in 2013, with shares up 31% and with the stock recently tagging a new 52-week high at $55.64 a share.

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The current short interest as a percentage of the float for TripAdvisor sits at 9.8%. That means that out of the 106.86 million shares in the tradable float, 10.95 million shares are sold short by the bears. This is a decent short interest, so any bullish earnings news could easily spark a solid short-covering rally for shares of TRIP post-earnings.

From a technical perspective, TRIP 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 three months, with shares soaring higher from its low of $42 to its recent 52-week high of $55.64 a share. During that uptrend, shares of TRIP have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of TRIP within range of triggering a major breakout trade post-earnings.

If you're in the bull camp on TRIP, 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 at $55.64 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 1.86 million shares. If that breakout triggers, then TRIP will set up to enter new 52-week-high and all-time-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $60 to $70 a share.

I would simply avoid TRIP 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 at $52 a share with high volume. If we get that move, then TRIP will set up to re-test or possibly take out its 50-day at $50.85 a share. Any high-volume move below its 50-day could then put $48 to $44 a share into range for share of TRIP.

Sodastream International

Another potential earnings short-squeeze candidate is developer, manufacturer and marketer of home beverage carbonation systems Sodastream International (SODA), which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Sodastream International to report revenue of $113.11 million on earnings of 54 cents per share.

Just this morning, Roth Capital said it expects Sodastream International to benefit from rapidly expanding sales and new brand partnership but warned that the company's operating margin is likely to fall 100 basis points in the first quarter due to production issues and its Super Bowl ad. The firm is keeping its $60 price target on the stock and its buy rating.

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The current short interest as a percentage of the float for Sodastream International is extremely high at 39.5%. That means that out of the 17.36 million shares in the tradable float, 7.23 million shares are sold short by the bears. This is high short interest on a stock with a very small float. If the bulls get the earnings news they're looking for, then this stock could easily skyrocket higher post-earnings.

From a technical perspective, SODA 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 moving higher from its low of $45.25 to its intraday high of $56 a share. During that uptrend, shares of SODA have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of SODA within range of triggering a major breakout trade.

If you're bullish on SODA, then I would wait until after its report and look for long-biased trades if this stock manages to break out to a new 52-week high above $56 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 810,468 shares. If we get that breakout, then SODA will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $65 to $70 a share.

I would avoid SODA 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 $53 to $52 a share with high volume. If we get that move, then SODA will set up to re-test or possibly take out its 50-day at $50.33 a share. Any high-volume move below its 50-day could then put $47 to $45 into range for shares of SODA.

Green Mountain Coffee Roasters

Another earnings short-squeeze prospect is specialty coffee and coffee maker player Green Mountain (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 $1.02 billion on earnings of 73 cents per share.

During the last quarter, this company reported revenue of $1.34 billion, and GAAP reported sales were 16% higher than the prior-year quarter's $1.16 billion. Also during the last quarter, non-GAAP EPS was 76 cents per share and GAAP EPS was 70 cents per share, which was 6.1% higher than the prior-year quarter's 66 cents per share.

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The current short interest as a percentage of the float for Green Mountain Coffee Roasters is extremely high at 26.5%. That means that out of the 128.97 million shares in the tradable float, 32.25 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then this stock could see a solid short-covering rally 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 three months, with shares soaring higher from its low of $42.25 to its recent high of $59.62 a share. During that uptrend, shares of GMCR have been consistently 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 major 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 levels at $59.62 to $60 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 3.60 million shares. If that breakout triggers, then GMCR will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $70 to $75 a share.

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 $57 to $55.31 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 level at its 50-day of $54.37 a share to $52.58 a share. If those levels get taken out with volume, then GMCR could hit $47.50 to $45 a share post-earnings.

BroadSoft

My final earnings short-squeeze play today is global provider of communications software and services BroadSoft (BSFT), which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect BroadSoft to report revenue of $38.60 million on earnings of 11 cents per share.

This company has topped Wall Street analysts' estimates four times in the past four quarters. Just recently, William Blair said the company is closer to a collaboration with Google that could focus on enterprise resellers, system integrators and MSPs. The firm has an outperform rating on the stock.

The current short interest as a percentage of the float for BroadSoft is extremely high at 16%. That means that out of the 27.59 million shares in the tradable float, 4.16 million shares are sold short by the bears. This is a stock with a high short interest and relatively low tradable float. This is the perfect combination needed for a large short squeeze, if the bulls get the earnings news they're looking for.

From a technical perspective, BSFT is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. Just today, shares of BSFT have started to trend back above its 50-day moving average of $25.28 a share. That move is quickly pushing shares of BSFT within range of triggering a near-term breakout trade.

If you're in the bull camp on BSFT, 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 $28 to $29.40 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 981,027 shares. If that breakout triggers, then BSFT will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $32.48 a share to $34 to $36 a share.

I would simply avoid BSFT or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 50-day at $25.58 a share with high volume. If we get that move, then BSFT will set up to re-test or possibly take out its next major support levels at $23.32 to $22 a share. Any high-volume move below $22 a share will then put $20.45 into range for shares of BSFT.

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

-- Written by Roberto Pedone in Madison, Wis.

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

Roberto Pedone, based out of Madison, Wis., 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.