What is a “Short Squueze?” And How to trade them.

One of our students asks about “Short Squeeze”.

Short squeeze basically means there are no more sellers left to sell. Short squeeze bounce can be fast and furious as several factors underneath propels the move.There are various type of short squeeze, stock in a downtrend that has good earning or news or general market or sectors that has seen sharp pullback in a short period of time could trigger short squeeze as long/intermediate term short sellers takes profit and late shorts who thought the stock would tank more had to cover with losses and dip buyers steps in for bargain long.
In an uptrend , stock also can create a squeeze as short seller think the stock has been up so much that it is primed for a pull back, as they short , the stocks moves more ,causing them to cover and late buyer’s starts to chase the stock causing even more upside parabolic  moves.

How does a trader know when there will be a short squeeze? There is no secret formula as where a squeeze might happen but there are certain market condition and patterns that can prepare you for a short squeeze play.  Easiest way to play short squeeze is you want see rapid pullback in the Market or individual stocks/sectors over short period of time. Stock generally will bounce certain support or moving average. Even after they breach support intraday after a huge pull back. You want to stalk the stock for signs intraday. You want to see patterns like double bottom. Higher lows, intraday flags or downtrend line breaks as the short term moving (5 or 15 or 30 minuets) averages flatten out. Let’s take a look at an example.

Let’s take a look at an example of short squeeze Energy stocks has been down for days. LNG one of the stock that has been down for four days along with the energy sector and finally caught a short squeeze bounce.

In the intraday time frame the stock had higher low than previous days low . VWAP was acting as resistance and eventually stock clears the VWAP and downtrend line , creating a fast short squeeze.

In our trading boot camp class we cover various strategies like “Rubber Band Snap back plays” “Squeeze zone play” that go into more details on how to trade short squeeze plays.Check out  our 60 day Bootcamp course. Our program is designed in such a way that you come out of it ready to trade live in just 3 months. We teach you everything from risk management to scanning to trading strategies. I also share my profitable intraday trading strategy which will make you money short term regardless of Market condition. The class is one of a kind, see why you should sign up for the course here . You will also have access to a private community where you can ask questions, share charts and talk with the instructors or other traders.
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