The Short Squeeze
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As the price of the stock you shorted moves higher, you will be
forced to exit your short position by buying back the stock. Once
the Street recognizes that there are a lot of short positions in a given
stock, traders might buy the stock in an attempt to drive up the
price. When the shorts start covering their positions, the upward
momentum can be tremendous. A frightened short seller will pay
almost any price to get out of a stock. In most cases, a rally started
by short covering will not last very long. This is the first short
squeeze. Get ready to be squeezed again by a danger little known to
short sellers called the second squeeze.
As the price of the stock you shorted moves higher, you will be
forced to exit your short position by buying back the stock. Once
the Street recognizes that there are a lot of short positions in a given
stock, traders might buy the stock in an attempt to drive up the
price. When the shorts start covering their positions, the upward
momentum can be tremendous. A frightened short seller will pay
almost any price to get out of a stock. In most cases, a rally started
by short covering will not last very long. This is the first short
squeeze. Get ready to be squeezed again by a danger little known to
short sellers called the second squeeze.