What causes a short squeeze?
When the short float is a significant percentage of the total float and many of the stops come into play, a short squeeze is highly likely. ARTC has been basing in a narrow range for a few weeks. During this time many shorts have tightened their stops in the area of the blue line on the daily time frame just above. When price rallied up to this level, many stops were hit simultaneously. Stops then turn into market orders. The time it takes to process all of those orders results in a short squeeze.
8 comments:
I recall an astute trader mentioning ARTC in Feb 8th comments.
"ARTC basing but not sure of direction at this point."
Thanks guys,
Jim, you've got a good memory and that's an asset for good trading IMO.
Jamie, how do you know that that move was a 'short squeeze'? Thanks
Anon,
I have not been able to find ARTC shares to short for a long time. That means that the short float is maxed out. As soon as price took out the blue line on the daily time frame (a good place to set a stop if you are holding a short position/swing trade), a lot of stops were hit which resulted in a short squeeze. The time to process a large quantity of stop orders which turn into market orders when they are hit, results in the vertical move caused by the squeeze effect.
Anon, good question. I've elaborated the answer in the post as well.
Jamie,
Thanks for the clear answer. Your blog is excellent and your explanations appreciated.
Anon
thank you Jamie
Welcome guys!
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