4 Stocks Ready for the Short Squeeze

28 September 2011

Below are the charts of small-cap stocks that have been heavily shorted by the street, and should the market continue to rally like we have seen over the last few days, these stocks could see their share price launch into the stratosphere because of the bears being forced to cover their short positions in the stock. Based on the number of shares that are being borrowed, for some of the stocks, it could take as many as 30-40 days to cover all the shares held short in the individual stock.

If you don't know what a short squeeze is, that is where a stock starts to rise rapidly, and as the trend continues to escalate, the short sellers will likely want out. For example, say a stock rises 5% in one day, those with short positions may be forced to liquidate and cover their position by purchasing the stock. If enough short sellers buy back the stock, the price is pushed even higher.

4 Stocks Ready for the Short Squeeze.

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Comments

0 #1 MikeK 2011-09-28 12:22

I disagree somewhat..Generally, in a bear market the timing of short buying action is near the bottom of these trendline channels, where shorts buy to take profits. Near or above downtrendlines shorts like myself look to add to short positions.

The buying off the lower trendline channel is short covering and momentum traders.. IMO :-)