Reason #2: A Short Squeeze Likely Ahead
This morning, there has been chatter all over message boards suggesting that a short squeeze may be on the horizon for the stock. Digging in, there’s a strong argument that this may be the case.
Before we get into how a short squeeze will help, here’s a bit of info for those that don’t know what a short squeeze is. In the market, there are several ways to make money. One way is by shorting a stock that you believe is going to fall.
Essentially, short sellers borrow shares for a fee and sell them on the open market. When the price drops, they buy the shares back, making the spread between where they sold and where they bought as a profit.
However, when prices go up, short sellers can take a hit. As such, they are forced to purchase shares in an attempt to stop the bleeding, only sending the value of the stock further up. Many believe that this is going to happen for YUMA.
It makes sense too. Since the middle of September, shorts have had this bull by the horns. Yuma Energy has been seeing dramatic declines, even in times where geopolitical tensions push the value of its product higher.
Not to mention, the stock has a float of about 645,000 shares and is trading in multiples of that in terms of volume. With this float and this volume, YUMA should be trading much higher. What’s holding it down is the short sellers. Nonetheless, many believe that today’s gains will soon trigger a short squeeze, only sending the stock higher. If this is the case, it could be a tremendous win for those who got in early.
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