Short squeeze
In short
#TradingA short squeeze is a sharp price spike caused by short sellers being forced to buy back the shares they borrowed. Their buying pushes the price higher, which forces more shorts to close, which pushes it higher still.
Why it matters
A squeeze explains price moves that look disconnected from any news. The rise is driven by forced mechanical buying, not by anyone deciding the asset is worth more. That is why squeezes are violent, brief, and usually give the gains back. The buying pressure ends the moment the shorts are out.
Example
A stock has 25% of its float sold short. Better-than-expected earnings push it up 12%, short sellers hit their loss limits and buy to close, and the stock ends the day up 40% on no further news.
Frequently asked
How do I tell whether a squeeze is happening?
The usual tells are high short interest as a share of float, a high days-to-cover ratio, a price move far larger than the news justifies, and unusually heavy volume. None of them confirm a squeeze on its own.
Are short squeezes predictable?
The setup is visible in short interest data, but the trigger and timing are not. Heavily shorted stocks can stay heavily shorted for months. High short interest is a condition for a squeeze, not a forecast of one.