dani face dani quote

When the short squeeze works best

In last week’s edition of our Short Squeeze Series, we talked about what exactly a Short Squeeze was and who can benefit from the explosive moves it creates. This week we’ll be ending our Short Squeeze series by explaining when this works best and what key factors to look for when using this strategy going forward.

When does the Short Squeeze work best…?

When deciding whether or not riding a short squeeze is appropriate there are a few important things to consider. 

First, do you have time to watch the close and open of the market? I find that these are the most important hours of the day when riding the short squeeze because that’s when you’re looking for that explosive high-after-high action. 

Here’s an example of a 15 minute chart on Virgin Galactic Holdings (SPCE) where I called a gap up due to this pattern, and it traded 10% higher the next day. 

Using the TrendStrength Turbo candles combined with watching the price action into the close and looking for my favorite short squeeze pattern — equaled a big overnight win.

Another thing you must consider is what the market conditions are telling you. As a general rule these are three distinct moments in time I look for: 

  1. When the stock market is making new highs —  when the highs continue breaking higher this is when shorts are getting squeezed out, and it’s a prime time to look out for the short squeeze pattern.
  2. When the stock market’s correcting — when we have a dead low, where there’s too many shorts, where they’re getting squeezed out.
  3. Earnings — When earnings come out and shorts are rolling over and dying.

If any one (or all) of these instances are happening it could be the perfect storm for creating an explosive short squeeze!

Don’t miss out on Danielle Shay’s course of the month where she explains how to use this full strategy in her Short interest secrets class. Click the image to learn more or follow this link.

How To Pick The Perfect Ticker:

Now that we know what kind of market conditions are favorable for riding the short squeeze, the next step is looking for a prime ticker. Often, I look for tickers that have one or more of the following attributes:

  • Volatility
  • Have little to no data on them 
  • Haven people betting against them (so they need to be hedged)
  • Explosive momentum
  • Volume buyers

By using this strategy you can expect to put yourself in the area of a good point of entry, and if we pick correctly there’s lots of money to be made! For reference, some examples of this that I’ve used so far are Beyond Meat, Tesla, weed stocks, and more but keep in mind — the market’s always changing and so are the ideal tickers! 

Now that you know what you’re looking for… make sure to remember these key factors before going forward:

  1. Learn how to recognize the pattern
  2. Identify key entry and exit points
  3. Ride the momentum wave

Pattern + Timing = Execution– that’s how I ride a Short Squeeze!

This concludes our Short Squeeze Series. If you’ve loved this Series as much as I have and want to learn more about the strategy I teach involving the short squeeze, check out my Course of the Month for September by clicking here! 

Up Next...

Growth Stocks On The Move, How To Capitalize

Hey traders!  This week, I wanted to highlight analysis from my friend and well-respected colleague, Mary Ellen McGonagle! She primarily focuses on stocks with a 2-week to 9-month horizon depending on market conditions. She has some great tips on how to capitalize on the current uptrend taking place! Check out her guest newsletter below to … Read more

Read More

How to Day Trade the SPX Using Butterflies

For today’s Five Star episode, I wanted to highlight what my colleague and fantastic trader, Allison Ostrander has been up to. She has been crushing it in our Simpler Options trading room, and her own Mastery service, using day trading butterflies on the SPX. I’ve loved watching what she’s doing, especially because, as you know, … Read more

Read More

AMD: Earnings in Focus

FAANG Earnings is Through: Is the FAANGover Next? We made it through FAANG Earnings Week, and saw volatile, market moving reports from the likes of Amazon (AMZN), Apple (AAPL), and Microsoft (MSFT). However, these moves, while significant, need to demonstrate follow-through for more continuation to the upside. Whether or not we will actually get that, … Read more

Read More

Subscribe Today!

Want to walk the path to trading success together? Join Danielle’s “Five Star Trader” E-Letter for market insights, tips, tricks, and special bonuses.

Sign Up Now