Get started

Shortsqueeze

The Boulevard of Broken Dreams. Pump and Dump Part IIRecently we watched in the news the resurrection of the "Meme Stocks" frenzy and the "Roaring Kitty" username. Those who witnessed the first surge in stocks like NYSE:AMC , NYSE:GME , NYSE:BB , etc., remember those were basically a "Make me Rich quick" kind of event, they were known as "Meme Stocks" because it all started as memes by a group of traders in internet forums who allegedly went against the Wall St. Hedge Funds who were heavily invested in shorting these stocks, by buying all at the same time and triggering a strong short squeeze. Well, this event was the hope for this group of traders who saw the opportunity to pocket huge profits in a short time frame, and it gave them the sense of power against Wall St. That time these stocks were heavily shortened, and they were prone to an aggressive short squeeze, not only from these member of the meme stock traders, but by professional traders. At the end of the day this group of stocks spiked, the people took profits, they left the market, some richer, some poorer, and others as bag holders. All these stocks faded along the time and some even went bankrupt. This event was imprinted in the memory of those hoping that this could happen again, but most amateur traders don't take the time to actually learn to trade, they ran with the rumor again after a fuzzy post by the "Roaring Kitty" and they just grabbed whatever was being mentioned in the forums. This time however it was very different. Their behavior was predictable and the professional traders already had a plan in advance, to short the spike. The small buying power of the meme stock traders plus their inexperience in swimming with professional sharks just turned them into an easy morning lunch. The rumor, action and shorting cycle was very fast. In the chart we can see outstanding profits in the order of hundreds of percentual points. But if we take a look at the short sale volume, we notice that the spike was immediately extinguished. The #VolumeCandles feature of Trading View is an excellent tool to visually pinpoint the development of this pump and dump event. In the chart I added some more stocks which were rumored in the forums, NYSE:GME , NYSE:AMC , NASDAQ:KOSS , NYSE:OKLO , NASDAQ:FFIE , NASDAQ:GWAV , $CRKN. The symbols used to display the short volume were: FINRA:GME_SHORT_VOLUME FINRA:AMC_SHORT_VOLUME FINRA:KOSS_SHORT_VOLUME FINRA:OKLO_SHORT_VOLUME FINRA:FFIE_SHORT_VOLUME FINRA:GWAV_SHORT_VOLUME FINRA:CRKN_SHORT_VOLUME All of them have the same pattern, Rumor in the meme stock forums Frenzy buying Immediate huge short volume The takeaway of this presentation is, never fall for what others "rumor" in forums, trade following your own system, your money and your profit/loses are just yours, so the responsibility to plan your trade. Buying and selling shares in the stock market is very easy, trading is not, and they're definitely not the same. #LearnToEarn.
NYSE:GMEEducation
by Madrid
4
GEVO. Manipulation Short squeeze. How short positions are reset.This example is on paper company Gevo inc - manufacturing. Chemical industry. Specialized chemicals. I will say that I combined the training idea with the trading one , how the stocks will be relevant for trading now, the potential first profit with confirmation of support can be about + 90%. Everything that happens now, goals, read below under the description of the manipulation of a short squeeze. But let's plunge into the past and in order to examine this detective story in order to evaluate this masterpiece of trading art by applying the punishment of the zombie crowd of believers “it should be like that” and “put sure Stop-Loss like a smart uncle wrote to us in a book.” It was like this ... It seems that the downtrend will last forever. After all, the price over the past 2 years has fallen by almost -99%! Dump from $ 245 to $ 3.30! This is what happens with real companies, but what about non-existent crypto projects? After all, almost all crypto projects are built on promises that this “nothing” will cost a lot. Buy and hold, and you and the plant employee will become a millionaire in a couple of months / years. The sweetest lie, the more willing poor John believes in it. As you understand, in many cryptocurrency projects for lovers of “buy and hold”, to become a millionaire and stop going to the factory is still ahead. It doesn’t matter whether these assets are pumped up yet or not, but their ultimate fate is the complete disappearance in the near future of the life of poor believing John. The graph shows a strong downtrend , merciless to investors. But among investors, one must not forget that there are very rich uncles who can also make a mistake. But those who want to fix it. Well, it is clear that after such a fall from $ 240 to $ 3, no sane person believes in growth already, how silly it is. Most traders enter only a short position. But there are more intelligent people who have thought and decided why we don’t make a lot of money on “100% faith” of people. The strongest downtrend. Drop from $ 240 to $ 3.30. Minus 99% for 2 years. As part of this trend, many sellers are going to expect a continued decline in the trend. But after all, everyone was taught that it is necessary to put Stop-Loss, and if you do not, then you should always close somewhere. Where will everyone have stops on this chart? Yes, everything of course depends on the point of opening positions, but the generally accepted approach - Stop-Loss who enters a short position will be put for the nearest resistance, that is, we will be interested in the zones above the selected levels on the chart. If everything is clear and the main crowd has so much faith and become accustomed to the eternal fall, why not take advantage of this and start the domino effect? After all, money is burned only initially to start the process, then only fantastic earnings. How everyone will be "trapped" in a trap. Any inadequate Stop-Loss sizes will be reached. Buy or margin Call. Gevo inc. Levels where the crowd of "shorts" puts Stop-Loss. It is in these zones that Stop-Loss of most market participants are behind the resistance. Large players understand this very well, it’s a sin not to use it if you have enough money on hand for this manipulation. Perhaps the biggest player is the company itself, which is very interested in getting out of a loss-making situation and making big profits. After all, having for this a certain amount of money you can start an avalanche-like process and get the most unattainable Stop-Loss, thereby moving the market up against the current trend on Stop-Loss. This is an avalanche-like process. You understand very well what will happen to those traders who have opened a short trend and the price will begin to rise against their position, and even grow rapidly impulse with no chance of pardon. Yes, everything is simple, when we reach a certain zone, the order is executed, that is, the position is closed by Stop-Loss. And we all know that a position is closed by opening a reverse position, which means that if we were on sale, then a purchase is opened to close, that is, we create additional demand for growth. And so on the chain. And it’s not scary that then the price will return very quickly back to the previous values, because the manipulators will be in big profit, and the trader who caught the margin will no longer enter a short position on this asset. This is what came out of the chart below. Gevo inc. Growth + 600% at closing short on Stop-Loss. As we can see, the first strong resistance was + 100% of the minimum value before the short squeeze. That's how you think who believed that the price will reach these values? It is clear that no one, well, especially since the price will reach the last Stop Loos zone. For such an action, money was needed only until the first Stop-Loss zone, after which the price moves according to the domino effect. Growth fuel is the closing of short positions. Virtually no one believed in growth, which is why the impulse was + 600%, due to the closure of short positions of those who did not believe. After a while, the price broke the line of the main downtrend. Price shifted to lateral movement. Wishing to enter the short was less and less, as everyone remembered the previous margin Call. A year ago, there were two more attempts to punish those wishing to enter a short position in this trading instrument. It was not possible to repeat the short squeeze situation on such a scale. The first short squeeze is + 67% and immediately after it + 27%. It can be seen that there are no more willing traders to enter a short position on this trading instrument. Gevo inc. The situation is now. Please note that only on short-squeezes did a large volume go out at the auction. Traders with short positions were squeezed out of the market specifically. In lateral movement, the price is now drawing a formation that could become a triple bottom. If support is confirmed , the growth potential to the previous local maximum and the first resistance is about + 90%. ___________________________________________ Manipulations. Someone thinks that manipulations occur only in the crypto market, this is not so, they are everywhere, only in the crypto market they are open and arrogant, as there is no responsibility for this. In other markets, there is price manipulation, but to a lesser extent, as if the relevant authorities prove guilty there will be huge fines, or the deprivation of a license for trading activities up to the prison. ___________________________________________ What is a squeeze on the exchange. Short squeeze. Long squeeze. Squeeze (eng. Queeze - squeeze out) - a situation in the financial market when Stop Loss is sharply collected. As a result of the sharp increase, part of the Stop Loss is squeezed out, and part is closed at the “what is” price, this leads to an even greater increase / decrease in the price. Since positions can be held both in purchase and in sale, both short-squeeze and long-squeeze are possible. Short squeeze - it happens when sellers (shorts) are forced to close their open positions in order to avoid even greater losses, which only spurs the price even higher. On the graph, the hairpin (shadow) is up. Long squeeze - exactly the opposite. A sharp decline in the price of assets, forcing buyers (longists) to close their positions. Here, the buyers are already the “victims”, who are forced to close open transactions at a loss in order to prevent even greater losses, which provokes a further drop in the price of the instrument. On the graph, the hairpin (shadow) is down. ________________________________________ Short squeeze on margin trading. If it comes to margin trading, the strongest buyer today is yesterday's short. The vicious circle for bears is called "short squeeze" - short squeeze. In order not to be trapped, market participants must understand the principle of short positions, see the potential for a situation that could provoke a “short squeeze”. Experienced traders know how to make a profit with a short squeeze. The strongest short-term growth waves often occur during periods when a large number of lower players find themselves locked in an unprofitable position due to an unexpected price increase for them. As a rule, these are mid-level traders and so-called “hamsters” market participants with a level of knowledge and experience that is close to zero and close to it. Unfortunately or vice versa, fortunately the bulk of the crowd of the crypto market is precisely this layer of society. In such a situation, in order to get out of the trap they have to actively buy this cryptocurrency in which they are locked at any price in order to save part of their capital and fix the loss. I will explain in more detail so that the mechanism of this phenomenon becomes more clear. A short position or short-term transaction (from impudent short) is an operation when a trader sells a borrowed coin with the intention of buying it back later at a lower price. After the return of the borrowed coins, the difference between the sale price and the purchase price becomes profit. You can borrow cryptocurrency from the exchange, which as a guarantee for such a loan requires an adequate amount of guarantee security in the account. As a guarantee, money, bitcoin or other cryptocurrencies, which are valued at a certain discount, can act. When the value of the coin in which you are in a position increases, the size of the required guarantee for short positions also begins to grow rapidly. If the amount of funds in the account is insufficient to cover the required amount of security, the exchange may forcefully close the position. Downgrade players usually try to prevent this situation and close the position before submitting a margin call request from the exchange. However, their tactics here are essentially the same - a quick purchase of a coin that has grown in price, and you are in a short unprofitable position on it. If the size of the positions of such participants is large enough, then this situation can lead to skyrocketing prices and the avalanche-like closure of other shorts. Scalper traders and intraday traders who often open counter-trend trades in the hope of a pullback after active growth can aggravate the situation even more. If the rollback is not realized, then their purchases may become additional fuel for the upward movement. ________________________________ The immaturity of the cryptocurrency market provides opportunities for manipulation. An important feature of the cryptocurrency market, which is often ignored, is its tendency to respond to the actions of individual bidders. By individual bidders, I mean large traders, the creators of individual cryptocurrencies on which manipulations occur, as well as exchanges, which naturally themselves are owners of large cryptocurrency assets. And also, if desired, can affect their price. Roughly speaking, these are market participants who are called “whales” in the slang of traders. The cryptocurrency market is more affected by the influence of these particular market participants than other markets, due to the lack of maturity and insufficient control of the relevant state financial control bodies. No fundamental does not work without money support, but money on the exchange without the influence of the fundamental works in such an uncontrolled market perfectly. For example, we are all familiar with such frequent phenomena in the crypto market as "pumps" (artificially pumping prices). Very often they occur even without the release of FUD news on a particular coin. Also, the entire crypto market is very much tied to the dynamics of bitcoin, which can lead it in the opposite direction to fundamental factors. In recent years, the market has become more “mature”: instead of the buy-and-hold trading strategy, many have begun to use more advanced methods. Futures contracts, trading with leverage, opening short positions are now available. The more powerful players appear in the industry, the more the community takes on them “tricks” from the field of trading. More and more traders are using short positions in a falling market, allowing them to earn money in such conditions. And naturally, in such conditions, short squids and long squises often occur. Since the majority of traders take short positions in the bear market, many receive big losses, some especially greedy and not experienced margin calls. Large investors can begin to behave dishonestly Short-squeeze can be carried out only by a large market participant, such manipulations are beyond the power of ordinary traders. How to do this you need a huge amount. As a rule, such manipulations are done by the exchanges themselves. This is illegal - but everything is legal on the cryptocurrency market! There are conspiracy theories that such manipulations are carried out by exchanges, thus getting rid of customers who will definitely be in the black due to short positions and withdraw money from the exchange ecosystem.
NASDAQ:GEVOEducation
by SpartaBTC
23
Cracking the Short SqueezeImagine this: a group of traders betting that a stock's price will drop. But suddenly, the price surges, forcing them to buy and causing a chain reaction of buying that shoots prices up. This exciting but risky event is called a short squeeze. Why Does It Happen? Short squeezes occur when a lot of traders need to buy suddenly. These traders, initially betting on price drops, now must buy to cover their positions, creating a buying frenzy. The more traders in this situation, the higher the prices shoot. It's Not Just Stocks: Short squeezes don't only happen with stocks; they can happen in any market where traders can bet on prices dropping. If there aren't many ways to bet against an asset, its price can keep rising for a long time. Rare Opposite — Long Squeeze: On the flip side, there's a rare event called a long squeeze, where people betting on price rises get trapped in a selling frenzy, causing prices to drop suddenly. How Traders Use It: Smart traders watch the long/short ratio for an asset. If there are more bets against it (shorts) than for it (longs), there might be a squeeze opportunity. These traders buy before the squeeze and sell when prices shoot up, making a quick profit. In the world of finance, short squeezes are like exciting rollercoaster rides. They can lead to big gains, but if you're not careful, you might end up taking a financial plunge. Happy trading 💜
Education
by Vestinda
Short squeezes, gamma squeezes, and the GameStop dramaIntroduction Video game retailer GameStop is up nearly 800% in the last two weeks. The story of how this happened makes for both an entertaining soap opera and an educational example of some market-making forces every trader should be aware of: short squeezes and gamma squeezes. Buckle in to learn how reddit vigilantes took on activist short-sellers and caused a massive spike in a struggling retail stock. Act 1: The Citron short The story begins with a brief video released by activist short-seller firm Citron Research in which Citron's Andrew Left announced a short position in the stock. The video wasn't really up to Citron's usual standards. Usually they expose some kind of fraud when they take a short position, but this time the argument was that GameStop was a low-quality company in a doomed brick-and-mortar retail sector and is not going to be able to turn itself around. Here let me pause to define some terms: "Short-sellers" are traders who borrow shares of a stock, sell the borrowed shares at current market price, and then buy the shares back later in order to return them to the lender. If the stock goes down between the sale and the purchase, the short-seller pockets the difference as profit. If the stock goes up, the short-seller takes a loss. "Activist" short-sellers are a special category of short-sellers who do research in order to find poorly managed or fraudulent companies, take a short position on them, and then release their findings to the public in the hope that the release of negative information will drive the stock price down. Act 2: The Wall Street Bets squeeze Activist short-sellers have played a role in exposing nearly every major corporate fraud that's ever been taken down. In my opinion they perform an important market function and offer an important service to investors. But a lot of people hate activist short-sellers. They're often accused of releasing false or misleading information in order to manipulate a stock, and plenty of critics also feel that short-sellers are unpatriotic, pessimistic, and destructive. If you watched The Big Short and hated all the main characters because they were trying to destroy the banks and betting against the American economy, you'd probably also hate Citron Research. That's how the folks on a subreddit called "Wall Street Bets" feel about Citron. Activist short-sellers often get hacked, threatened, and bullied, but usually it's by agents of a fraudulent company they've targeted. (Invisibilia's episode "Trust Fall" documents a recent horrifying case involving the fraudulent mafia-connected German fintech company Wirecard.) The GameStop case is a little different because it was Internet vigilantes, and not corporate agents, who targeted the shorts. Left and other GameStop shorts came under an intense barrage of verbal assaults and cyberattacks from members of the Wall Street Bets subreddit who believe in GameStop's turnaround story. And that's not all the vigilantes did. They also coordinated a campaign to manipulate GameStop's price upward and "squeeze" the shorts out of their trade by buying lots of far out-of-the-money GameStop calls. This campaign has been tremendously successful, as evident from the stock's recent price action. Citron's Andrew Left posted a video on Twitter in which he announced that as a result of the backlash, he has exited his GameStop short trade. Here, again, let me pause to define some terms: The problem with short-selling is that your losses are potentially infinite. If you're short on a stock whose price price increases more than 100%, then you can lose more than 100% on your trade. If you don't have enough cash in your account to cover the loss, then this can trigger what's called a "margin call," where you're forced to buy shares in order to "cover" your short. And if your short position is large enough, there may not be enough shares for sale on the open market for you to quickly exit your trade, so it may take some time for you to cover. This can cause a dramatic increase in stock price, known as a "short squeeze." There's another kind of squeeze called a "gamma squeeze," which occurs when someone buys a lot of far-out-of-the-money call options on a stock. The sellers of far-out-of-the-money call options usually will buy shares of the stock in order to cover themselves in case the options eventually get exercised. That drives up the stock price. Plus, there are a lot of algorithms out there that buy or sell stocks based on what open options contracts imply about the market's expectations for a stock's future price. So buying out-of-the-money call options can also trigger those algorithms to buy, further driving up the price. In the last couple years, retail options traders, especially on the Wall Street Bets subreddit, have realized that they can manipulate stock prices by banding together to buy lots of out-of-the-money calls. This strategy has been successfully used for over a year to drive up the price of Tesla, and now it's being used on GameStop with similar impressive results. Conclusion The biggest moral of the story here may be, don't sell shares short. It's a dangerous environment for short-sellers, with gangs of vigilante longs roaming the social media streets. The GameStop and Tesla stories prove that retail traders, if they band together, have the power to be market makers and to take on institutions. It also proves that markets aren't necessarily efficient or rational. Sometimes they are a battleground for differences of ideology or social class, and the underlying company fundamentals matter not at all. Of course, this likely won't go on forever. Using a gamma squeeze to manipulate a stock price is arguably illegal, so there's a possibility that the SEC will eventually crack down. Gamma squeezes also require the existence of market makers willing to sell far out-of-the-money calls, and it's possible that that willingness will go away. If market makers stopped selling these calls on GameStop or Tesla, the game would quickly be up. And finally, I think we will see companies increasingly position themselves to take advantage of these situations. The ideal move for GameStop executives would be to issue a lot of new shares right now in order to harvest the manipulators' money and raise enough cash to cover the company's future losses. (Tesla has done this a few times in the last year or two.) And, as it turns out, GameStop has an offering ready to go, through a program they put in place on December 8. (Possibly they had advance notice of this coordinated Wall Street Bets program to manipulate the stock.) They only have to pull the trigger, which I assume they will do when they feel the stock has hit its peak. That is likely to trigger a sell-off in the stock, but it could also potentially stabilize the company's finances, stave off bankruptcy, and greatly extend GameStop's life. And that's another reason why fundamentals sometimes don't matter and why it's dangerous to be short on a stock: because to some extent, it's the stock price that drives a company's success rather than the other way around. A higher stock price allows a company to raise more capital, and more capital allows the company to invest in updating its business model and turning things around. Perhaps we will see this run in GameStop's stock price lead to large capital expenditures, a new business nodel, and a total revitalization of the company. Only time will tell.
Editors' picks
NYSE:GMEEducation
by ChristopherCarrollSmith
329
Timeframe selection is important to trade short squeeze!Timeframe selection is important to trade short squeeze! What happens in a short squeeze, the short-sellers are under pressure because they are under distress trying to cover their short positions. Along with bargain hunters and active traders wanting to make a profit from the short squeeze, all that combined actions pushes the price even higher. Time is money! Short traders try to trade carefully and fast. Short traders know that they have to act quickly otherwise the next higher price will be more expensive to cover their short position. However, short traders have to cover their short positions fast but don't want to cover the stocks too fast because that will move the price even faster and that puts short sellers at a disadvantage. Short sellers become long traders once they completely cover their short shares. Time frame selection is crucial when making a decision to go long or short. When trading a short squeeze, the weekly chart doesn't give the active traders good information. In fact, the weekly chart is useless to active traders because it doesn't provide any information. Active traders wanting to participate in short squeeze should consider looking at the 15-minutes chart or the 1-minute chart to make their decision to go long or to go short. With the weekly chart, it is impossible to decide the entry or exit price. Thank you for reading! Greenfield This is article #3 on how to trade short squeeze. Remember to click "Like" and "Follow!" to see more articles on how to trade short squeeze. Disclosure: Article written by Greenfield. A market idea by Greenfield Analysis LLC for educational material only.
NYSE:GMEEducation
by GreenfieldAnalysis
4
What is a short squeeze? How to trade a short squeeze?What is a short squeeze? A short squeeze is a short period when the price of a security increase rapidly due to the demand greater than the supply available for that security. A short squeeze is due to short-sellers covering their positions and long traders looking for a bargain. How to trade a short squeeze? A common shape of a short squeeze is an "inverted J" shape. The straight-line of the inverted J pattern is due to aggressive buying by the bargain hunters and short sellers covering. The hook shape of the inverted J is formed due to the profit-taking of the short-term traders. A trader can trade in the direction of the "inverted J" shape. What are some of the reasons one may fail to trade this pattern? Possibly due to failing to identify a correct bottom before placing a trade. Possibly a temporary bottom was identified, but the downtrend continued and trapped the traders. Thank you for reading! Greenfield Remember to click "Like" and "Follow!" Disclosure: Chart interpreted and article prepared by Greenfield. A market idea by Greenfield Analysis LLC for educational material only.
BITSTAMP:BTCUSDEducation
by GreenfieldAnalysis
8
What Put:Call Ratio Tells Us About SPY QQQHere is a chart of the put to call ratio when compared with NASDAQ's ETF, QQQ. When the line is at the bottom of the PC chart, that means market participants are net short. When at the top, they are net long. I'm sure we've all heard the saying that market makers usually take the other side of the trade. This chart shows that this is a true. When stocks are going up, the majority of retail traders are shorting the market. When the market goes down, the majority of retail traders are longing the market. Right now we're in an extreme situation where the majority of retail traders are shorting the market and institutions are doing what they do best, hitting their stop losses and squeezing them out, essentially taking the free money on the table. When this is no longer profitable, the trend usually changes with a few exceptions (see March 2020). To look at it another way, institutions make money on retail trader's emotions which is specifically disbelief. They say 90% of retail traders lose money trading the stock market. I believe this chart is evidence of that.
PEducation
by ttrending
21