Short Squeeze

A Short Squeeze is a Financial Market Phenomenon characterized by a rapid increase in a stock price due primarily to excessive short selling.

Context:
- It can (typically) occur when the Stock Demand increases relative to its Stock Supply.
- It can (often) result in significant financial losses for those holding short positions.
- It can be associated with Short Sellers buying stock to cover their short positions.
- It can be influenced by Market Fundamental Analysis, such as market sentiment or speculative trading.
- It can lead to high market volatility and can affect the overall Stock Market dynamics.
- It can be associated with Market Manipulation, Regulatory Changes, or changes in the underlying Company's Business Prospects.
- It can (often) be a temporary phenomenon, with stock prices eventually returning to levels justified by fundamentals.
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Example(s):
- a GameStop Short Squeeze in January 2021.
- a Volkswagen Short Squeeze in 2008.
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Counter-Example(s):
- A Market Correction due to adjustments in stock prices based on fundamental analysis.
- A gradual increase in stock price due to positive company performance.
See: Supply And Demand, Stock Market, Stock, Short Selling, Fundamental Analysis.

References

(Wikipedia, 2024) ⇒ https://en.wikipedia.org/wiki/short_squeeze Retrieved:2024-2-3.
- In the stock market, a short squeeze is a rapid increase in the price of a stock owing primarily to an excess of short selling of a stock rather than underlying fundamentals. A short squeeze occurs when demand has increased relative to supply because short sellers have to buy stock to cover their short positions.