Other attributes
Short squeeze is a fast increase in the price of a stock, mainly due to the excess of short sales of this stock, and not other fundamental factors. The danger, especially for intraday traders and scalpers, is that it is almost impossible to identify it with the help of technical or fundamental analysis. Especially often short squeezes appear where there are a large volumes on short positions.
Causes of occurrence
Traders believe that the tool is already overbought enough, the price is about to go down, and they begin to enter short position, provoking an increase in the volume of short deals. Professional bidders with large capitals see that a high volume of short trades has been formed for this asset and, in order to reverse the situation, they buy stock in large quantities. Shortists realize that the forecast wasn't justified, the asset begins to grow, bringing a loss, and in a panic they close their positions to minimize losses. This pushes the quotes to even faster growth. The positions of the players who hoped for a reversal and didn't close, they are knocked out by margin call, which throws up the price even more. Those, who intially caused this chain reaction wait until the quote reaches a value that is not attracive to the demand for this asset, and begin to take profits, salling their stock at the maximum price. After that, as a rule, the asset falls at the almost the same rate as it grew.
