Stock Quotes in this Article: CBST, COL, INTC, ISRG, SWKS

WINDERMERE, Fla. (Stockpickr) -- Short-sellers hate being caught short a stock that produces earnings that please the bulls. 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 timeframe 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. That's why it can be worth betting prior to the report: Buy only if you have a very strong conviction that the stock is going to rip higher, and it's acting technically very bullish.

Here's a look at a number of stocks that could experience big short squeezes when their companies report earnings this week.

Cubist Pharmaceuticals

My first earnings short-squeeze trade idea is biopharmaceutical player Cubist Pharmaceuticals CBST, which is set to release its numbers on Thursday after the close. Wall Street analysts, on average, expect Cubist Pharmaceuticals to report revenues of $204.74 million on earnings of 32 cents per share.

If you're looking for a stock that's trending very strong heading into their earnings report, you should take a strong look at shares of Cubist Pharmaceutical. During the last six months, this stock is up over 18%. Shares of Cubist are so strong that this stock is just one point off its 52-week high of $42.10 a share.

The current short interest as a percentage of the float for Cubist Pharmaceuticals is very high at 17.1%. That means that out of the 61.31 million shares in the tradable float, 10.50 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 3.7%, or by about 377,700 shares. This stock has an extremely high short interest, so any bullish news could easily set off a giant short-squeeze.

From a technical standpoint, CBST is currently trading above both its 50- and 200-day moving averages, which is bullish. This stock has been uptrending very strong since it bottomed in August at $28.82 a share. During that uptrend, this stock has been consistently making higher highs and higher lows, which is bullish price action. Now the stock is very close to triggering a breakout trade if the bulls get the news they're looking for.

If you're bullish on CBST, I would get long after they report their earnings if the stock breaks out above $42.10 a share on high-volume. Look for volume that's tracking in close to or above its three-month action of 1,019,050 shares. If we get that action, I would look for a sharp spike higher in CBST by 15% or more.

I would only get short or avoid any long trades on CBST after they have released their earnings if the stock falls back below $39 on high volume. I would add to any short positions if the stock then takes out its 50-day moving average of $38.17 with volume. Target a drop back towards its 200-day moving average of $35.60 a share, or possibly lower if the bears whack this stock post-earnings.

Intuitive Surgical

Another potential earnings short-squeeze trade is Intuitive Surgical ISRG, which is set to report results on Thursday after the market closes. This company designs, manufactures and market da Vinci Surgical Systems, which are advanced surgical systems. Wall Street analysts, on average, expect Intuitive Surgical to report revenues of $483.72 million on earnings of $3.33 per share.

During the last four quarters, this company has seen double-digit year-over-year revenue growth. During that timeframe, the company has seen its revenue trend higher by an average of 22.4%. The largest growth came in the most recent quarter when revenue hit 29.7% from last year's quarter. Intuitive Surgical has registered increasing profits for three straight quarters. The most recent quarter saw net income jump by 41.3% from the year-earlier period.

The current short interest as a percentage of the float for Intuitive Surgical sits at 2.7%. That means that out of the 38.49 million shares in the tradable float, 1.04 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 7.2%, or by about 69,000 shares. This isn't a huge short interest by any means, but a decent short-squeeze could develop if the bears are caught pressing to hard into the quarter.

From a technical standpoint, ISRG is currently above both its 50- and 200-day moving averages, which is bullish. This stock has been uptrending very strong since it bottomed in August at $320 a share. During that uptrend, the stock has been consistently making higher highs and higher lows, which is bullish price action. Now the stock sets up to trigger a big breakout after earnings.
If you're bullish on ISRG, I would wait until after they report their results and buy the stock once it breaks out above $474.50 with on high volume. Look for volume that's tracking in close to or above its three-month average action of 342,806 shares. If we get that move, I think this stock could spike $20 to $40 points post-earnings in a heartbeat.

I would avoid any long trades or short ISRG after earnings if it drops below $462.50 a share on heavy volume. I would then add to any short positions if the stock trades below $452.50 with volume. Target a drop back towards some support at $446.10 or the 50-day moving average of $441.98 a share if the bears hammer this stock lower post-earnings.

Skyworks Solutions

One earnings short-squeeze play in the semiconductor complex is Skyworks Solutions SWKS, which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Skyworks Solutions to report revenues of $389.63 million on earnings of 50 cents per share.

The current short interest as a percentage of the float for Skyworks Solutions is notable at 4.1%. That means that out of the 186.14 million shares in the tradable float, 7.66 million are sold short by the bears. The short sellers have also been increasing their bets from the last reporting period by 7.8%, or by about 553,600 shares.

From a technical standpoint, SWKS is currently trading above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been uptrending strong since it hit a near-term bottom at $13.72 in December since its current price is just over $19 a share. Shares of SWKS are now approaching some past resistance levels as we approach their earnings report.

If you're bullish on SWKS, I would wait until after they report their earnings and buy some shares if it trades above $20 a share on high-volume. Look for volume that's tracking in close to or above its three-month average action of 5,116,990 shares. If we get that action, then look for SWKS to challenge its 200-day moving average of $21.84 a share. I would add to any long positions if SWKS then takes out the 200-day with strong volume. Target a run up towards $23.50 or possibly higher.

I would avoid getting long SWKS or get short if the stock drops below $18 to $17.50 a share on high-volume after their earnings report. I would add then add to any short positions if SWKS takes out its 50-day moving average of $16.85 with high-volume. Target a drop back towards $16 to $15 a share if the bears hammer this lower post earnings.

Rockwell Collins

One earnings short-squeeze play in the aerospace and defense complex is Rockwell Collins COL, which is set to release numbers on Thursday after the market close. This company is engaged in the design, production and support of communications and aviation electronics for commercial and military customers worldwide. Wall Street analysts, on average, expect Rockwell Collins to report revenues of $1.09 billion on earnings of 84 cents per share.

This company has seen its net income trend higher in three straight quarters. Over the last four quarters, Rockwell Collins has seen its revenue trend higher by an average of 3.6% year over year. Its best growth was in the first quarter of the last fiscal year was 8.1% year over year.

The current short interest as a percentage of the float for Rockwell Collins is decent at 5.4%. That means that out of the 140.39 million shares in the tradable float, 7.94 million are sold short by the bears.

From a technical standpoint, COL is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock bottomed in August at $43.63 a share and since then it has uptrended to its current price of just over $56 a share. Due to that uptrend, COL is trading very close to some breakout levels that could get taken out if the company delivers a bullish report.

If you're bullish on COL, I would look to be a buyer after their report if the stock breaks out above $57.96 a shares on strong volume. Look for volume that's tracking in close to or above its three-month average action of 1.150,640 shares. If we get that move, then I would target a run back towards $60 to $62.22 a share, or possibly higher if the bulls gain full control of this stock post earnings.

I would avoid any long trades in COL or get short if this stock drops back below its 50-day ($54.80) and 200-day ($55.88) moving averages after they report earnings. Any high-volume moves back below those key technical levels should set this stock up to trend down towards $52.90 to $50 a share post-earnings.

Intel

My final earnings short-squeeze trade idea is semiconductor king Intel INTC, which is set to release numbers on Thursday after the market close. This company develops advanced integrated digital technology products, primarily integrated circuits, for industries, such as computing and communications. Wall Street analysts, on average, expect Intel to report revenues of $13.72 billion on earnings of 61 cents per share.

For the last three consecutive quarters, this company has seen its profits trend higher. The most recent quarter saw a 17.4% year-over-year growth in net income after seeing just a 2.3% profit growth in the second quarter and a 29.4% jump in the first quarter.

The current short interest as a percentage of the float for Intel stands at 2.3%. That means that out of the 5.09 billion shares in the tradable float, 117.48 million shares are sold short by the bears. This is far from a large short interest, but with over 110 million shares sold short, it's more than enough to lead to a decent pop in the stock if the bulls hear what they're looking for.

From a technical standpoint, INTC is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong since it bottomed in September at $18.99 a share. During that uptrend, this stock has consistently been making higher lows and some higher highs. Now INTC is setting up to trigger a big breakout post-earnings.

If you're bullish on INTC, I would wait until after they release their results and buy the stock if it breaks out above $25.92 high volume. Look for volume that's tracking in close to or above its three-month average volume of 56,196,300 shares. If we get that action, I would look for INTC to spike higher by 10% to 15%.

I would get short or avoid INTC if after their report this stock fails to breakout and drops back below its 50-day moving average of $24.42 on high volume. Target a drop back towards $23.05 or the 200-day moving average of $22.31 if the bears hit this stock hard post-earnings.

To see more potential earnings short-queeze plays like Insteel Industries IIIN, Zoll Medical ZOLL and Interactive Brokers Group IBKR, check out the Earnings Short Squeeze Plays portfolio on Stockpickr.

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