Signs of a squeeze

[manderic]

Hello, long time lurker here,

I don't normally post questions because Google is sufficient for most answers. But I've been trying to find a starting point for this for awhile, with no luck. To summarize, do any of you have any pointers for detecting a potential market squeeze (either from manipulation, misinterpretation of situations, or expected but unaccounted for changes in demand)?
To be clear, I'm not asking for current opportunities you've identified (I won't trust such tips anyway). Nor am I expecting to be spoon fed your methods. But any hints of where to look would be appreciated.

 

[Scataphagos]

Somebody keeps track of "stocks most shorted". They'd likely go up the most when squeezed. Might check for that.

 

[guru]

Hello, long time lurker here,

I don't normally post questions because Google is sufficient for most answers. But I've been trying to find a starting point for this for awhile, with no luck. To summarize, do any of you have any pointers for detecting a potential market squeeze (either from manipulation, misinterpretation of situations, or expected but unaccounted for changes in demand)?
To be clear, I'm not asking for current opportunities you've identified (I won't trust such tips anyway). Nor am I expecting to be spoon fed your methods. But any hints of where to look would be appreciated.

Not sure what do you mean by “unaccounted for changes in demand”.
Isn’t it demand that causes short squeezes?
While you cannot determine someone’s intent in terms of why someone’s buying and for how long, unless you’re the one creating demand. Some traders go in with size and create demand, so you’d have to do the same, and then again only you’d know whether you’re buying for a day or for a year.
But no one gets short squeezed if there is no demand and when no one’s buying the thing. So demand has to come first.

Unless you’d provide specific example when even after the fact you’ve determined what happened earlier, step by step, and you understand everything that happened, including whether it was big investor buying, or corporate buyback, or pump & dump. But if you cannot determine this after the fact and provide specific example, then how would you even attempt to predict this before the fact?
Basically you’d need to do a few a case studies, which would then give you clues and provide potential answers to your question.

 

[schizo]

To summarize, do any of you have any pointers for detecting a potential market squeeze (either from manipulation, misinterpretation of situations, or expected but unaccounted for changes in demand)?

There's no place that will tell you where or when the short squeeze will occur ahead of time. But as mentioned above, there are sites that provide access to the short interest data like this one:

http://shortsqueeze.com/

There are many other sites, both free and premium. But then again, short squeeze can be a tricky thing to anticipate. Sometimes, what you thought was a short squeeze turns out to be a dead cat bounce.

 

[trdes]

Not sure what do you mean by “unaccounted for changes in demand”.
Isn’t it demand that causes short squeezes?
While you cannot determine someone’s intent in terms of why someone’s buying and for how long, unless you’re the one creating demand. Some traders go in with size and create demand, so you’d have to do the same, and then again only you’d know whether you’re buying for a day or for a year.
But no one gets short squeezed if there is no demand and when no one’s buying the thing. So demand has to come first.

Unless you’d provide specific example when even after the fact you’ve determined what happened earlier, step by step, and you understand everything that happened, including whether it was big investor buying, or corporate buyback, or pump & dump. But if you cannot determine this after the fact and provide specific example, then how would you even attempt to predict this before the fact?
Basically you’d need to do a few a case studies, which would then give you clues and provide potential answers to your question.

I don't understand why someone would have to determine who or why a short squeeze is taking place(unless for educational purposes). If you can determine a short squeeze has a reasonable probability and profit from it, who made it happen wouldn't seem relevant?

Or put in another way, it's not like you need inside information or have to be a complete genius to understand where a short squeeze might happen. Forced short covering setups happen a lot , particularly in a market still being fueled by the fed.

A quick example without going into large amounts of details is there's a certain pattern where you can see that people are buying and accumulating, but at the same time you will see price acting weak for an extended amount of time, often doing fast drops than recovering. This very rarely ends up going lower, particularly if the stock or indexes you're trading is bullish on larger charts.

Now can I prove 100% that this setup is for sure forced short covering? Absolutely not, but I only trade to make money and I know it works often. That's just the way my mind processes what's going on and makes the most sense to me given all the factors and data I am using to take that trade.

 

[trdes]

There's no place that will tell you where or when the short squeeze will occur ahead of time. But as mentioned above, there are sites that provide access to the short interest data like this one:

http://shortsqueeze.com/

There are many other sites, both free and premium. But then again, short squeeze can be a tricky thing to anticipate. Sometimes, what you thought was a short squeeze turns out to be a dead cat bounce.

Maybe my definition of short squeeze isn't the standard one, but a short squeeze can happen and it be a dead cat bounce. For example a lot of times even in a bearish market or stock, there can be too many shorts loaded on the bus and as price moves up people will buy into their stops so that will cover and push price up. These same people though will be selling a little higher as the shorts cover, plus selling into the new buyers that come in chasing. Once the money has switched hands price can often fall back to means reversion (roughly where the move began).

So, it is possible for a short squeeze and a dead cat bounce, one doesn't preclude the other. Again just my experience.

 

[guru]

I don't understand why someone would have to determine who or why a short squeeze is taking place(unless for educational purposes). If you can determine a short squeeze has a reasonable probability and profit from it, who made it happen wouldn't seem relevant?

Or put in another way, it's not like you need inside information or have to be a complete genius to understand where a short squeeze might happen. Forced short covering setups happen a lot , particularly in a market still being fueled by the fed.

A quick example without going into large amounts of details is there's a certain pattern where you can see that people are buying and accumulating, but at the same time you will see price acting weak for an extended amount of time, often doing fast drops than recovering. This very rarely ends up going lower, particularly if the stock or indexes you're trading is bullish on larger charts.

Now can I prove 100% that this setup is for sure forced short covering? Absolutely not, but I only trade to make money and I know it works often. That's just the way my mind processes what's going on and makes the most sense to me given all the factors and data I am using to take that trade.

Yes, for educational purposes because the question didn’t seem clear enough to me. That’s why I recommended going through a few examples to analyze, and you provided “a quick example”.
My answer was theoretical, to show difficulty of detecting short squeezes. While every potential solution requires understanding and analyzing the problem from multiple angles.

 

[trdes]

Yes, for educational purposes because the question didn’t seem clear enough to me. That’s why I recommended going through a few examples to analyze, and you provided “a quick example”.
My answer was theoretical, to show difficulty of detecting short squeezes. While every potential solution requires understanding and analyzing the problem from multiple angles.

After re-reading the thread, I see I was incorrect, because he was posing the question on how to find a short squeeze. So, my post was garbage and I stand corrected.

 

[manderic]

This is why I generally don't post my questions. Looking at my first post, I keep thinking "this was really badly written."
Thanks to everyone for pointing out my mistakes. I'll have more to say later, but for now let me explain what I mean by "squeeze."
For me, a squeeze refers to any situation where someone is effectively forced to buy or sell. Short squeezes fall under that definition, but are far from the only example. To give one alternative example, if someone is going to lose their property, say a house, unless they get a lot of money soon, and the only way they can get enough funds is to sell that house, they a experiencing a squeeze. They are not being "forced" to sell that house, just as in a short squeeze no one is forced to buy the asset they are shorting. But if all the alternatives are worst, they'll likely do it.

 

[Karin42]

To be honest, they are rarely monitored on a continuous basis, so it is difficult to make recommendations...