The SEC says positive sentiment from Reddit day traders, not short covering, was the biggest driver of GameStop’s wild stock surge. Here are the 5 main takeaways from the report.

People wait to cross the street in front of GameStop at 6th Avenue on March 23, 2021 in New York. GameStop stocks falls more than 10% after the video game store showing strong earnings but lower than expected.
“It was the positive sentiment, not the buying-to-cover, that sustained the weeks-long price appreciation of GameStop stock,” the SEC said.

  • Reddit-fueled retail traders, not short-sellers, drove the meme stock frenzy in January, the SEC said in a report released Monday.
  • The 44-page report looked into what led to the January frenzy and the roles Robinhood and payment for order flow played in the saga.
  • But the SEC didn’t signal any coming rule changes, and instead laid out issues to consider rather than making recommendations.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The Securities and Exchange Commission published a long-awaited report on Reddit darling GameStop’s retail-trading frenzy on Monday, saying the phenomenon was caused by a rapid rise in investor accounts betting on the stock.

“Whether driven by a desire to squeeze short sellers and thus to profit from the resultant rise in price, or by belief in the fundamentals of GameStop, it was the positive sentiment, not the buying-to-cover, that sustained the weeks-long price appreciation of GameStop stock,” the regulator said.

In its 44-page report, the SEC debunked the theory that a “short squeeze” may have sent shares of GameStop and other meme stocks soaring. While many short sellers were forced to cover their short positions, the agency said, there is no evidence that this narrative was a major factor.

GameStop purchases by those covering their short positions were a “small fraction of overall buy volume,” and the share price continued to stay high after the direct effects of such covering would have waned, the SEC said.

Here are 5 takeaways from the report:

1. GameStop’s rally was driven by 880,000 new investors trading the stock in January

“By January 27, the number of unique accounts trading GME on a given day increased from less than 10,000 at the beginning of the month to nearly 900,000.”

2. Hedge funds remained largely unscathed

A handful of hedge funds including Gabe Plotkin’s Melvin Capital lost billions of dollars over their bearish bets against GameStop. But the SEC said these firms were not badly affected.

“Staff believes that hedge funds broadly were not significantly affected by investments in GME and other meme stocks. Staff did not observe that any advisers to private funds and registered funds experienced liquidity issues or difficulties with counterparties,” the regulator said.

3. Questions on “game-like” trading apps, payment for order flow incentives

The SEC said regulators should consider whether game-like features are encouraging investors to trade more.

“Consideration should be given to whether game-like features and celebratory animations that are likely intended to create positive feedback from trading lead investors to trade more than they would otherwise.”

“In addition, payment for order flow and the incentives it creates may cause broker-dealers to find novel ways to increase customer trading, including through the use of digital engagement practices,” the regulator said.

The report did note that much of the retail order flow in GameStop was purchased by wholesalers and executed off-exchange.

4. No assurance to retail investors that they won’t face trading restrictions in future

Robinhood and some other brokerages restricted trading in meme stocks during the epic rally, causing fury among users over missing out on gains. The investing app said the National Securities Clearing Corporation asked for a $3 billion deposit to cover trading risks on highly-volatile stocks.

“In their customer account agreements, some broker-dealers reserve the right to decline customer orders or cancel trades without prior notice. Such actions could be taken, for example, for legal, compliance, or risk management reasons,” the report said.

5. Few clues on change to market-structure rules

The agency didn’t provide specific policy recommendations. It did say that the events call for a review of the factors that made brokerages restrict trading, digital engagement practices, dark pools and market makers, and short-selling. Chair Gary Gensler has previously pointed to payment for order flow and “gamification” of trading as coming under the SEC’s scrutiny.

“January’s events gave us an opportunity to consider how we can further our efforts to make the equity markets as fair, orderly, and efficient as possible. Making markets work for everyday investors gets to the heart of the SEC’s mission,” Gensler said.

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Koss extends 2-day rally to 43% as meme-stock traders cheer patent victory over Apple

Koss Fitclips, $11.99.
Koss Fitclips. Amazon

  • Koss shares have rallied 43% in two days of trading after winning a patent battle against Apple.
  • The patent board declined to review Apple’s challenge to two of the company’s patents.
  • The headphone-maker has been caught up in the meme-stock frenzy this year.

Koss shares have surged 43% in two days after the headphone-maker won a patent battle against Apple.

Trading of the company’s shares, which have been caught up in the meme-stock frenzy this year, was briefly halted Tuesday evening amid a spike in volatility following the patent ruling.

The Patent Trial and Appeal Board rejected to review Apple’s challenge to two of Koss’ patents, Bloomberg Law reported, adding that the iPhone maker didn’t meet its burden to show it could prove that Koss’ patents for wireless earphones and headphones didn’t cover new inventions.

Koss, which has sued the iPhone maker for infringing on its headphone patents, has had a volatile year amid the frenzied trading in meme stocks. In a Reddit post Tuesday that received more than 1,000 upvotes, a Redditor asked if the Koss rally would prompt GameStop shares to “follow.”

Shares surged nearly 2,000% in January as the army of Reddit retail traders drove massive rallies in heavily shorted stocks, including GameStop, AMC, and BlackBerry, among others. Koss has a high short-squeeze score on Fintel.io, as the company’s so-called “dark pool short volume ratio” is 60%.

Koss closed at $64 on Jan. 29 at the height of its rally this year. On Wednesday, shares of the company surged 16% to $21.82 at 9:30 a.m. in New York.

A representative from Koss did not immediately respond to Insider’s request for comment.

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Camber Energy plummets 63% after short-seller report takes the wind out of latest meme-stock play

Oil rig sunset background
Oil rigs.

  • Camber Energy stock lost more than half its value Tuesday following a short-seller report.
  • Investment firm Kerrisdale Capital claimed the company would “once again” be a penny stock.
  • The Houston-based oil-and-gas company became a meme stock last month.
  • See more stories on Insider’s business page.

Shares of newly minted meme stock Camber Energy lost more than half their value Tuesday after an investment firm released a short-seller report that claimed the energy company was “in the middle of a death spiral.”

“This one has something for everyone: death-spiral financing, a fake CFO, delinquent filings, fired auditors 3 wks ago, insolvent energy assets & the saddest family of entrepreneurs in the cleantech vaporware space,” New York-based Kerrisdale Capital wrote in a tweet about its report.

A representative from Camber Energy did not immediately respond to Insider’s request for comment. Shares fell as much as 63% to $1.11 at 12:27 p.m. in New York.

Data from Fintel.io shows short interest in Camber Energy stock jumped to 24.4 million shares from 6.1 million shares in September, giving the company a 23.5% short interest as percent of float. That same month, retail traders, known for banding together to squeeze short sellers, helped drive a more than 600% rally in the Houston-based oil and gas company.

In its short-seller report, Kerrisdale claimed the most “fascinating” part of the company’s problems is its share dilution, saying the market is “badly mistaken about Camber’s share count and ignorant of its terrifying capital structure.” Kerrisdale estimated the company’s fully diluted market capitalization is $900 million.

“Camber isn’t worth $900 million,” Kerrisdale said. “If it looks like a penny stock, and it acts like a penny stock, it is a penny stock. Camber has been a penny stock before – no more than a month ago, in fact – and we expect that it will be once again.”

Following the short-seller report, a well-known retail trader known on Twitter as “Tray’s Trades,” called Kerrisdale’s move a “pump and dump.” The stock trended among retail traders on Twitch on Tuesday, data from TopStonks.com showed.

According to its website, Camber Energy, through its majority-owned subsidiary Viking Energy Group, owns a working interest in more than 145 oil and gas fields across Texas, Louisiana and Mississippi.

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Camber Energy spikes 29% as retail traders target the heavily shorted name as the next meme stock

Oil rig
Oil rigs.

  • Camber Energy stock jumped 29% Thursday amid retail-trader hype.
  • The Houston, Texas-based oil and gas company is heavily shorted, according to Fintel.io data.
  • The run-up in shares also comes as oil and gas prices have surged.
  • See more stories on Insider’s business page.

Camber Energy stock jumped as much as 29% Thursday as retail traders hyped up shares on social media while data pointed to a potential short-squeeze opportunity.

The Houston-based oil and gas company was trending among Twitch users on Thursday, according to TopStonks.com. Quiver Quantitative data showed the company was also the fifth most-mentioned stock on the r/WallStreetBets subreddit Wednesday with 91 mentions.

“CEI to Pluto,” one Redditor said of the stock’s ticker on r/WallStreetbetsELITE.

Meanwhile, data from Fintel.io shows short interest in Camber Energy stock rose three-fold to 24.4 million shares from 6.1 million shares in September, giving the company a 23.5% short interest as percent of float.

Retail traders mobilized on social media have been known for targeting companies with high short interest rates in the past. But now, data suggests retail traders have scared short sellers away from most mid-size companies.

Camber Energy, through its majority-owned subsidiary Viking Energy Group, owns a working interest in more than 145 oil and gas fields across Texas, Louisiana and Mississippi, the company said on its site.

The rally in its shares comes as US oil and gas prices have reached multi-year highs amid supply-side issues. Camber did not immediately respond to Insider’s request for comment.

Camber, along with Virgin Galactic and Chinese food manufacturer Farmmi, led gains among meme stocks Thursday, while other well-known memes like GameStop took a backseat.

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How to find meme stocks like GameStop and AMC: Your complete guide to spotting and profiting from hot stocks on social media and Reddit’s Wall Street Bets

Stonks meme
Meme stocks have been arguably the biggest market trend of 2021.

  • Meme stocks like GameStop and AMC Entertainment have taken the investing world by storm in 2021.
  • Small-time retail traders have banded together in a rebellion against Wall Street hedge funds.
  • Insider regularly interviews experts who share how to spot meme stock surges.
  • Below is a compiled list of stories covering everything you need to know about meme stocks. You can read all about the trend by subscribing to Insider.

Stocks have steadily advanced in 2021 as the economy rebounded from the pandemic, but the S&P 500’s solid gains pale in comparison to those of previously left-for-dead companies like GameStop (GME) and AMC Entertainment (AMC).

Those long-suffering stocks shocked the world by spiking as much as 1,700% and 2,800%, respectively, and ushered in a new era of investing in what are now known as meme stocks.

Meme stocks have no precise definition, but they’re not hard to spot. Common characteristics of these select few stocks include sudden rallies and volatile price swings on unusually high trading volume.

The action is typically driven by members of online forums like Reddit and social media users, who sometimes make and share memes to promote and build momentum around the stock’s rally. But stocks that meet the above criteria can be considered meme stocks without having a big online following.

Below is a comprehensive breakdown of Insider’s coverage of the meme stock movement and how investors can profit from it.

Top meme stocks now

Retail investors are always searching for stocks to send “to the moon.” Below are some of the hottest names that social media users are buzzing about during the week of August 23.

Read more:

How to trade meme stocks

Trading meme stocks isn’t as simple as it sounds. It takes hours to surf through Reddit forums for the next trendy stock, and it requires a huge, carefully coordinated online movement to send individual stocks spiking.

But sending meme stocks to the moon isn’t rocket science either. Insider has interviewed investing pros who have simple strategies for spotting meme stocks, as well as the creator of a site that saves investors time by scanning Reddit forums for the next big meme stock.

Just as important as finding the next hot meme stock is avoiding common trading mistakes. An analyst who’s covered GameStop since 2002 told Insider how to spot short squeezes and avoid getting burned, and a strategist shared how to avoid landmines in a rapidly evolving investing landscape that now includes meme stocks.

Read more:

How the meme stock movement began

GameStop is widely considered to be the first meme stock. The long-beleaguered video-game retailer suffered for years as its sales were cannibalized by e-commerce giants like Amazon and by the video-game industry’s shift to online games. Its C-suite became a revolving door for executives: Three different CEOs led the firm in 2018 alone.

GameStop’s miraculous surge began in January 2021 after Ryan Cohen, the founder of online pet-store company Chewy, joined the company’s board and inspired optimism among investors. Cohen could spearhead GameStop’s e-commerce efforts and help the company get back on track, investors believed.

But the main reason behind GameStop’s monumental move was a massive short squeeze.

Convinced the video-game seller was destined for the same fate as Blockbuster, a handful of Wall Street pros bet against the stock through shorting, a process where investors borrow shares of a company they think will decline, then sell them immediately in hopes of buying them back at a cheaper price before returning them and booking a profit.

Small-time traders flipped the script on hedge funds by driving the price of the heavily shorted shares up, forcing the bears to close their positions by buying back borrowed shares, which perpetuated the cycle. The stock then rose to the moon, and the rest is history.

Read more:

What to know about the dangers of meme stocks

If getting rich off meme stocks were easy, thousands of Redditors would be millionaires.

The harsh reality of markets is that for every buyer, there must be a seller. For every trader that nailed the bottom of a stock, someone else sold at the worst possible time – and every time an investor sells at the peak, someone must have bought ahead of the crash. Some unlucky soul bought GameStop shares at its all-time high of $483.

By definition, investing in meme stocks is incredibly risky, and poorly-timed trades can lead to massive losses. Critics have said the practice creates “false markets” and reflects how the market is broken.

Michael Burry, the hedge fund mogul who predicted the housing market crash, told Barron’s via email earlier this summer that a meme stock crash could come soon.

“I believe the retail crowd is fully invested in this theme, and Wall Street has jumped on the coattails,” Burry said. “We’re running out of new money available to jump on the bandwagon.”

Read more:

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Support.com extends 2-day surge to 150% as social media traders rally around new short-squeeze target

Reddit screen on laptop with smartphone reddit logo
  • Shares of Support.com extended their surge for a second day to gain 200% Friday morning.
  • Retail investors on social media cheered on the technical support software company, with many saying that the stock could be on the receiving end of a massive short squeeze.
  • Trading volume exploded to 100 million shares, compared to the avearge 8.9 million.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Shares of Support.com extended their surge for a second day to as much as 150% shortly after the opening bell on Friday.

Retail investors on social media cheered on the technical support software company, with many saying that the stock could be on the receiving end of a massive short squeeze.

The stock was the top trending ticker on Stocktwits and Yahoo Finance Friday morning. Over 100 million shares changed hands Friday, compared to average trading volume of about 8.9 million.

One user on Stocktwits compared the stock’s squeeze to GameStop and urged fellow investors to hold the stock, even as it was trading at $49.80, a roughly 152% jump from the Thursday close.

“Short data.. not yet covered..they are creazy[sic] ..many small HF will play with us this squeeze,” said another user. While one speculated: “$SPRT shorts needs to cover! We will se[sic] $ 300-500 today.”

Meanwhile, retail investors within the Reddit channel r/SPRT discussed Support.com’s recent merger with bitcoin mining company Greenridge Generation Holdings, with one post claiming that the stock could see the “mother of all short squeezes.”

“The major short HF is not covering because they have a hedge with Series A stock but the hedge only works post-merger. If we squeeze them to a stock price where they can no longer meet their margin requirement BEFORE the merger, the MOASS will take place,” the post theorized.

Support.com was trading around $41.71 before the opening bell Friday.

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Citadel will redeem $500 million of its shares in Melvin Capital: Report

2021 03 03T224230Z_1_LYNXMPEH221O5_RTROPTP_4_RETAIL TRADING USA CONGRESS.JPG
Melvin Capital boss Gabe Plotkin testified to Congress on the GameStop saga in February

  • Citadel will redeem about a quarter of its investment in Melvin Capital.
  • It is unclear if the redemption will be the last from Citadel.
  • The Wall Street Journal first reported the news on Saturday.
  • See more stories on Insider’s business page.

The hedge fund Citadel will redeem about $500 million of the $2 billion it invested in Melvin Capital earlier this year as the latter suffered crippling losses amid a short squeeze, the Wall Street Journal reported Saturday.

The investment was for a non-controlling but revenue-sharing stake in the fund.

Melvin Capital lost more than half of its value, over $6 billion, earlier this year as retail investors bid up the shares of what became known as “meme stocks” – firms like GameStop, AMC, and others – on which the fund had short positions. The movement was started and led by members of the Reddit group “r/wallstreetbets.”

The rising share prices caused Melvin Capital to close its short positions by buying shares of the firms back, which in turn pushed their prices up further.

Citadel, along with Point72, another hedge fund, stepped in to help Melvin Capital at the time. Citadel and Point72 are run by Ken Griffen and Steve Cohen, respectively.

It is unclear if the redemption will be the last from Citadel. The Journal report said that Citadel plans to remain a large investor in Melvin. Melvin capital ended the first quarter down 49%.

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Short-seller Jim Chanos blasts meme-stock traders as greedy and entitled – and says they cry and point fingers when they lose money

Jim Chanos
Jim Chanos.

  • Jim Chanos accused meme-stock traders of being greedy, childish, and entitled.
  • The short-seller said they were chasing profits, not punishing Wall Street’s avarice.
  • Chanos’ recent shorts include Elon Musk’s Tesla, Warren Buffett-backed DaVita, and Beyond Meat.
  • See more stories on Insider’s business page.

Jim Chanos blasted meme-stock traders as immature and petulant in a tweet this week. The veteran short-seller also accused them of only caring about money, dismissing their grand claims of taking on Wall Street and democratizing finance as false narratives.

“$GME is up 780% and $AMC is up 1,470% this year. $AMC has tripled in the past three months,” the Kynikos Associates boss tweeted from his WallStCynic account, using the stock tickers for GameStop and AMC Entertainment – two of the most popular meme stocks.

“This is not outrage, it is greed,” Chanos continued. “The newest generation of entitled retail ‘investors’ must win all the time, or they cry and blame ‘them,'” he added, referring to the hedge funds and shadowy institutions that some meme-stock buyers accuse of rigging markets.

The Kynikos boss tweeted in response to another user suggesting the GameStop and AMC short squeezes had exposed Wall Street crooks’ manipulation of stock prices. Chanos has repeatedly mocked meme-stock buyers for their ignorance in recent months, and warned the scale and extent of market speculation today is far worse than during the dot-com bubble.

Chanos is best known for calling out Enron’s massive accounting fraud and shorting its stock before the energy giant collapsed into bankruptcy in 2001. His more recent shorts include Beyond Meat, Elon Musk’s Tesla, and DaVita – a kidney-dialysis specialist that counts Warren Buffett’s Berkshire Hathaway as its largest shareholder.

The short-seller is one of several high-profile investors to sound the alarm on the day-trading boom. Buffett, Michael Burry, Mark Cuban, and several others have cautioned amateur stock-pickers and options traders not to get carried away.

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Nearly $900 million in crypto shorts were squeezed in a single day as bitcoin surged into the $40,000 region

Bitcoin
Bitcoin

$883 million worth of crypto short positions were liquidated in a 24-hour span amid bitcoin’s rally towards $40,000.

Data from Bybt.com compiled by The Block notes that short positions on bitcoin accounted for 81% of the squeeze, with $720 million liquidated.

Most of the crypto short liquidations happened late Sunday night as bitcoin’s price spiked 10% to break the $39,000 level for the first time in six weeks.

Ryan Todd, research analyst at The Block, told Insider that given bitcoin’s historically high price relative to past cycles, this liquidation event posted one of the largest total magnitudes of losses in dollar terms for traders who were positioned short bitcoin with margin and futures products.

“We’ve seen this in the past when bitcoin has entered a choppy trading range for several weeks, with traders positioning towards a bearish bias,” Todd said. He cited a $1 billion liquidation late in December when bitcoin broke past $20,000, and a January $800 million liquidation when bitcoin passed $30,000.

He added that he’s not surprised by the magnitude of the liquidations given the nature of the bitcoin market.

“This is business as usual for crypto – a market that is known to be highly volatile and exposed to high levels of product leverage on these exchanges. A perfect recipe for liquidations that can cut both ways depending on sharp spot movements to the up or downside,” said Todd.

As of Monday afternoon, bitcoin has jumped 18% to a 24 hour high of $40,499, according to Coinmarketcap.

bitcoin shorts

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What is a short squeeze? Understanding why they happen and how they work

The back of a stock trader watching stocks crash on screen.
A short squeeze afflicts short-sellers, investors who have sold stocks they don’t actually own, in hopes of buying them back later for less money. If the stock rises instead, the strategy goes awry.

  • A short squeeze is when a shorted stock’s price rises and sellers close their position to avoid a loss.
  • Signs of a short squeeze include frequent buying of a high number of shares being sold short.
  • Buy-limit orders and hedging strategies offer short-sellers some protection against a short squeeze.
  • Visit Business Insider’s Investing Reference library for more stories.

A short squeeze is a stock market phenomenon, something that happens to investors and traders who have acted on the assumption that an asset (a stock, usually) is going to fall – and it rises instead. Here’s how it happens.

What is a short squeeze?

Shorting a stock involves borrowing the stock, usually from a broker, and selling it now in hopes of buying it back later for less in order to make a profit.

A short squeeze is when a shorted stock’s price goes up instead of down, forcing the short seller to decide between covering their position by continuing to pay interest on the borrowed shares in hopes the price will go down or exiting their position by buying shares at the new higher price and returning them at a loss.

The downsides of a short squeeze are significant, making shorting a stock a very risky strategy for all but the most experienced traders.

Gamestop short squeeze example

In late January 2021, shares of a company called GameStop (GME) stock, which had been trading around $2.57 per share, suddenly shot up, eventually as high as $500 – when users of the Reddit website subgroup Wall Street Bets began buying up shares.

This was bad news for short-sellers, who had bet the stock would keep falling. Unlike most investors, who want their stocks to appreciate, short-sellers make money when stock prices go down and lose money when they go up.

So when GameStop started gaining, these short-sellers were caught in what’s called a short squeeze. They had borrowed to support their pessimistic investment, and they now had to pay it back – by buying GameStop shares at the higher prices. Or else, hang on – and risk losing even more money.

As of mid-July 2021, GME hovered around $185 per share. While a majority of Markets Insider analysts have a Sell rating on the stock, it held up well on July 19, 2021, during a selloff sparked by an increasing number of cases of the delta COVID variant. Even then GME closed up 2.6%.

How does a short squeeze happen?

Here is how a short squeeze scenario unfolds:

  1. You identify a stock you believe is overvalued and take a short position. Borrowing and selling shares at today’s high price in anticipation the price will go down and you will be able to buy replacement shares at a much lower price.
  2. Instead, something happens causing the price of the stock to start going up. That “something” can be the company issuing a favorable earnings report, some sort of favorable news for its industry – or simply many other investors buying the stock (as happened with GameStop).
  3. You realize you’re unable to buy the stock back at a low price. Instead of sinking, it’s climbing – and it exceeds the price you bought it for. At this point, you must either buy replacement shares at a higher price and pay back your broker at a loss, or buy even more shares than you need – in hopes that selling them for profit will help cover your losses.
  4. All this increased buying causes the stock to keep going up. This forces even more short-sellers like yourself into a tighter vise. You have the same choices as above, only the stakes keep mounting, and so do your potential losses.

Protecting yourself against a short squeeze

There are specific actions you can take to try to protect yourself against a short squeeze or to at least alleviate its grip.

  • Place stop-loss or buy-limit orders on your short positions to curb the damage. For example, if you short a stock at $50 per share, put in a buy-limit order at a certain percentage (5%, 10% or whatever your comfort level is) above that amount. If the shares rise to that price, it’ll automatically trigger a purchase, closing out your position.
  • Hedge your short position with a long position.You can also buy the stock (or an option to buy the stock) to take advantage of rising prices. Yes, you’re betting against yourself, in a way, but at least you lessen the damages of the losses and benefit from the price appreciation.

Short squeeze indicators

Short squeezes are notorious for descending quickly and unpredictably. Still, there are signs a short squeeze may be coming:

  • Substantial amount of buying pressure. If you see a sudden uptick in the overall number of shares bought, this could be a warning sign of a pending short squeeze.
  • High short interest of 20% or above. “Short interest” is the percentage of the total number of outstanding shares held by short-sellers. A high short interest percentage means a large number of all a stock’s outstanding shares are being sold short. The higher the percentage, the more likely a short squeeze may be building.
  • High Short Interest ratio (SIR) or days to cover above 10. SIR is a comparison of short interest to average daily trading volume. It represents the theoretical number of days, given average trading volume, short-sellers would need to exit their positions. The higher this number, the more likely a short squeeze is coming. Both short interest and SIR are on stock quote and screener websites such as FinViz.
  • Relative Strength Index (RSI) below 30. RSI indicates overbought or oversold conditions in the market on a scale of 0 to 100. A stock with a low RSI means it’s oversold – that is, trading at a very low price – and possibly due to increase; a high RSI indicates the stock is extremely overbought – trading at a high price – and possibly due to drop. Any RSI below 30 signals an imminent price rise, which could lead to a short squeeze. A company’s online stock listing usually includes its RSI, often under its Indicators section.

The financial takeaway

A short squeeze is bad news for short sellers and good news for investors going long. The “squeeze” forces short sellers to buy, raising the price of the stock, which causes them to lose money. Investors (buyers) benefit as the stock price goes higher. As more short sellers exit, the price goes higher causing short sellers to lose more and buyers to gain more.

Watch for any of the indicators that a short squeeze may be coming, which includes increased buying pressure, high short interest, days to cover above 10, or an RSI below 30. Most of all, you should understand that the possibility of a short squeeze makes short selling risky. Don’t go there unless you understand and accept that risk.

‘Buy the dip’ means purchasing a promising stock when its price drops, assuming a fast rebound and future profitsOptions let you lock in a good price on a stock without actually buying it – here’s how option trading worksShort selling is a high-risk but high-reward trading strategy that profits from a stock price’s fallA long position means you buy a stock or stock option in the bullish belief its value will increase over time

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