Short squeezes take place when a heavily shorted stock, like SES, starts to see green in the market. Essentially, as the price of a heavily shorted stock heads up, those short on the stock start to lose money.
When this happens, those holding short positions are forced to cover their positions by purchasing shares. This leads to a large flood of volume, pushin the value of a stock up.
Generally, due to the flood of short sellers buying shares, the value growth seen during a short squeeze is significant. It’s not uncommon to see stocks gaining in multiples during events like this. So, SES with it’s 45% gains may have a long way to go when this is over.
However, keep in mind that when the squeeze is over, it will end quickly. In general, once the stock hits what traders perceive to be the top, we start to see profit taking. This profit taking drives the price of the stock down just about as fast as it went up. So, if you’re going to play the short squeeze game, please be sure to do so with caution.
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