How Bad Can Short Squeezes Be?

How Bad Can Short Squeezes Be?

How Bad Can Short Squeezes Be? 1024 576 Steven Dux

Welcome to my weekly recap, and today I want to dive right in on one of my significant gains while also touching on some negatives with shorting.

$ABIL

$ABIL didn’t hit the patterns that I thought it would, and because of that, I have missed my entry.

Out the gate, I thought I would see a gap up that turned out to hold its position and began a massive rotation. We’ve covered how rotation like this favors the long side, so I should’ve seen a 30% gain had I went in for the dip at the right time. The shorts with $ABIL were very close together with the possibility that many people were holding on. However, those shorts can be controlled by what we call double airing, and that’s when the bottom line pushes up, and the upper line forces the stock to go higher.

Operating your short squeezes with this understanding allows you to stretch the shorts to go either way. Even though my thought process with $ABIL didn’t pan out initially, I covered into the breaking high and watched the slow fade all day rather than giving the stock the chance to rebalance.

Knowing when my time was up put me at a $43,000 gain only because of my patience and attention as the stock changed.

$CTXR

I want to continue by talking about $CTXR as a player that comes with a warning. This ticker had massive parabolic spikes but dropped right back down to its entry. Emotions play hard when chasing those morning parabolics, so when people feel that pressure to take their gains and leave, those spikes don’t hold, and shorting becomes difficult. If you want to short $CTXR, knowing the resistance it holds will maintain your risk level, however, the morning spikes we see here can easily bust through that resistance, and you wouldn’t have the time to cover. 

$CARV

My last example, $CARV, comes through on low volume, squeeze-outs. This stock shows how easy it is to drop upwards of a 20% gain without having many shares. $CARV had low float, which spiked with little return and dumped after just a few hours. Besides wasting time, this stock proves what having a good entry, and heavy resistance can do. Looking at a stock like $CARV may be appealing because we experienced a previously dull market, but small mistakes can become big mistakes.

1 comment
  • Glayds Vermeulen January 25, 2021 at 6:44 pm

    Can you believe about Gamestop stocks?! Did you guys think it would increase like it has? Have you ever profited off a short squeeze like that before? I wonder if it will keep going up?

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