Do Your Research First
In general, a short squeeze takes place following a news release. For example, on Monday, October 14, 2019, NF Energy Savings (BIMI) announced an acquisition.
The stock was heavily shorted before the announcement. So, when the announcement came out, investors reacted by sending the stock up.
By the time the market opened, the stock was already gaining well over 100%. By mid day, the stock was up nearly 300%.
Looking through the history of the stock market, you see moves like this all the time. However, it’s rare that it happens without news. So, before you buy a heavily shorted stock in hopes of catching a short squeeze, do your research.
Are there any announcements that are likely to take place soon? For instance, in biotechnology stocks, is there data coming soon? Is a New Drug Application likely? In other sectors, coming closings of acquisitions, product launches, and other news could trigger a short squeeze.
So, before you buy a stock hoping for a short squeeze, dig in to see if news that will trigger a squeeze is likely ahead.