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The Short Squeeze: How to Ride the Momentum - YouTube

Channel: StocksToTrade

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- Lots of time during low price or low float stocks

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you'll hear about, short squeezes.

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You'll hear this a lot.

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But, what makes a short squeeze?

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What do you look for and how do you profit

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from these huge movers?

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(bright upbeat music)

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Hey everyone, lead trainer with Stockstotrade,

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Tim Bohen here.

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Be sure to like, subscribe and share with your friends.

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We put out a ton of videos,

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I want you to be notified immediately

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as soon as we drop one.

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So ring that bell.

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And then also, if you're looking to take that next step

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to take your trading to the next level,

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I love that you're here watching these videos,

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we put out a ton of stuff that I think really will help you,

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but check out the SteadyTrade Team,

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twice daily webinars from me,

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Mike Huddie, Kim Curtin, Matt Monaco,

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a growing list of mentors out there

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that give you that shortcut to success.

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Talking about longs, talking about shorts,

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talking about options, talking about high price,

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low price, tons of stuff, different approaches,

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it's the best way out there to learn trading

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in the minimal amount of time.

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So, all right, let's talk about, what is a short squeeze,

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what do we look for and how do we profit from it?

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So, I've got the chart of Kodak, up,

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this is kind of one of probably,

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Oh! I hate to say, the best,

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but one of the best examples of a short squeeze

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and this happened back in July of 2020,

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and you can see the stock gapped up from four to eight,

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but, what I wanna talk to you about,

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is where the real opportunity was on day two, okay?

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That's what's great about these setups is,

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they're telegraphed, okay?

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The best short squeezes, the best supernova,

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cause remember, many of you might be familiar

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with the supernova pattern,

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one of the reasons stocks go supernova,

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is because short sellers herd accelerate, okay?

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That's always the best way I can think of it

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and the best way I can explain it is, I mean,

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most of you understand, hopefully you understand

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what happens when you dump gasoline on a fire,

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don't ever do that by the way (laughs).

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If you're trying to get a stove fire started,

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get some dry wood or something,

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don't put gasoline on it, okay?

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Little tip, safety tip for you there,

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you don't wanna burn your hair off,

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but, it looks like I burned most of mine off,

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but that's just baldness.

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Anyway (chuckles).

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So what you've got with any momentum stock,

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so Kodak had news,

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they closed a loan with the federal government,

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they were pivoting into coronavirus type of vaccine,

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distribution, et cetera.

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So there was a catalyst, okay number one,

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but then what happens is when the shorts pile in,

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that catalyst is like the embers of the fire

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the fire is burning, but when shots come in,

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it's literally like dumping gasoline on the fire,

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cause then it just goes out of control.

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And that's how you get this $4 to $60 in two days

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because what happens is

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when the stock starts spiking wildly,

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shorts are forced to panic buy, okay?

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And this is why I wanna do this video to explain this stuff.

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Many of you have probably been trapped, long in a stock,

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that morning panicked, you know,

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maybe one of these OTC stocks

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that typically, you know, they almost

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all morning panic at some point,

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which creates great dip buy opportunities,

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but maybe you've been in one of these OTCs,

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it's dropping 30, 40, 50%,

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and you start doing a market sell,

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which, you know, something I don't recommend.

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We do a lot of videos on order types,

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definitely check those out.

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But, if you're doing that market sell,

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you know what happens,

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invariably, almost invariably, you'll hit a market sell,

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you'll get a terrible fail, below the bid,

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at the low of the day, and then the stock bounces, okay?

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I'm sure you've, if you've never been there,

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I hope you never will be there.

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But, if you're a jaded old trader like me,

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especially getting started,

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you make these bad decisions, it happens.

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So think about vice versa on the short side.

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When the stock is rapidly going up,

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shorts are gonna panic and they're gonna panic buy.

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So they're gonna put in market buys,

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and they're gonna get a terrible fail,

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way above the ask probably

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and it's gonna make the asks skip up.

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And then what happens is,

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the shorts start tripping over each other,

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as this stock rapidly spikes

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cause they're all market buy, market buy, market buy.

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And I think what makes this

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the best setup on the short side,

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at the end of the day,

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if you're selling a morning panic,

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you're getting out because you're like,

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oh! I can't believe I overnighted the stock.

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The thing with the long side is,

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if you're in a 10 cent OTC stock, let's use an example,

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the worst possible scenario, is it goes to zero.

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It goes from 10 cents to zero and it stops, okay?

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Keep in mind, on the short side,

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if you short some 10 cent stock, it can go to 20 cents,

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which is a 100% down,

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just like you'd be a 100% down on the long side.

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But what happens when it goes to 15

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or goes to 20 cents, okay?

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Again we've seen these stocks go

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to a dollar, $2, $3 in one day, okay?

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So think about what's happening to short's mentality,

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when they see the stocks rapidly skipping up,

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they're panicking justifiably so.

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I mean listen, I think we talk about psychology a lot

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in the SteadyTrade webinars,

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Kim Ann Curtin really focuses on psychology and emotions.

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But if you short a stock like Kodak,

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you should be panicking, you should be getting out ASAP

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because, what if you stock from four to 60?

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You're done, and you might even end up

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owing your broker money, it happens.

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Most brokers will margin you out basically,

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they'll force buy you-in, before your stock goes below zero.

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But stocks like Kodak,

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sometimes there's not even enough liquidity

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for your broker to force you out.

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So you can literally end up, owing a broker money,

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if you get stuck in one of these.

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So, I scared you, I warned you,

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how do we recognize one, okay?

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So I'm gonna jump to the intraday chart of Kodak,

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gonna focus on a couple of days, here back in July.

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Again this was July 28th that this, July 20--

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yeah 28th was the first day.

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So, the news came out early in the day

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where right here, stock was trading at about three bucks,

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gaps up into the 12 area, okay?

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400% move, most of you, if you're not familiar

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with what happens with these stocks,

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you'll think, I missed it.

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The great thing about this setup is

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there is, when you get these multi-day news

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with the ridiculous volume that we saw on Kodak,

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four to 12 is just getting started.

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Now I wanna be clear,

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you don't get one of these every day, okay?

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But, we get about one a month or so,

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and I mean if you can be ready,

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and I'm gonna talk about day two,

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if you can be ready on day two,

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man, you can get over the PDT fast,

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you can grow your account fast.

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I mean listen, if you've got

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a hundred shares of Kodak at 12 bucks,

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and I mean you're not gonna sell the top,

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but let's say you sell it 30, 40, 50, whoo!

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That makes a big difference in your account.

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So anyway, I'm not gonna focus on day one, okay

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Yes it was a wild move.

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Yes that's when the news hit.

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It was a good time to target it.

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But, what we wanted to see,

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and let me zoom in on a different level here.

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I wanna focus on specifically on day one.

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So, what we got day one is exactly what we like to see,

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in that, after that big initial spike, okay?

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Here's our big initial spike at the market open,

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stock fades all day.

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This is exactly what we wanna see

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because now what has happened, and this is dubious, okay?

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If you know the history of Kodak,

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you might be thinking Kodak?

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Especially if you're my age,

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yes, Kodak, the camera company, okay?

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They pivoted into cryptocurrencies, a few years back,

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got destroyed, after that,

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they now pivoted into virus plays,

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sketchy company, sketchy loan details.

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I mean read, there's a lot of,

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I won't get into the fundamentals too much,

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but, this whole loan with the government,

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CEO is like donating money to weird charities.

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This thing is sketchy as head,

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which is one of the biggest things we wanna look for,

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because the sketchier it is,

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the more biased shorts are gonna be.

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So when we start all seeing this, all day fade,

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this is what I call collecting shorts.

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Cause shorts are short in here, here, here, here,

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all the way through the day,

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because they're like Kodak's piece of crap,

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the loan's sketchy, this company's sketchy,

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et cetera, et cetera, et cetera.

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So they're shorting for a good reason,

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but, as it collects them, collects them, collects them,

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clauses on the low of the day.

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Look at that, lower the day clause,

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that's the market clause right there.

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Perfect example, of that what I call collecting shorts.

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Now, let's fast forward to where the magic happens, okay?

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And this is what I want you to be looking for.

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Is day two, stock gaps up in after hours,

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holds in pre-market, the dark areas after hours,

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the light area is a pre-market,

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then, spikes at the open,

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and then we get this big pull back, okay?

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And I'll zoom, I can zoom in

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but I wanna kinda keep this zoomed out

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because that's that dip and rip that we look for, okay?

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Because that's that spike at the open,

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that pullback that gets the shorts to add in,

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then, what we look for,

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is that high of day break, right there, okay?

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And let me zoom in, I kinda wanna keep it zoomed out

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because I want you to see the big picture of the idea,

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but I will zoom in, to show you what I mean

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on that dip and rip right here.

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So if you're familiar with candles, you know,

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this is what we refer to as a doji candle,

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particularly gravestone doji.

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That's that, spike at the open.

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And I'm looking at 15 minute candles,

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which is what I like to look at for the dip and rip,

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cause you know, you follow my videos

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9:45 is my favorite area.

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If you get that doji candle,

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the gravestone doji particularly,

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that first 15 minutes of the day

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and then it re-breaks the high of the day,

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you've got a solid indicator, so you can see at 22:50.

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Now, you might be saying, Tim,

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I got a small account, stocks trading at 22:50.

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Remember my friends, it went to 60 okay?

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You could have a hundred shares of this.

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And let's say you're selling minutes at 30, 35, 40.

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You're making $10 a share, on a hundred shares

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with a small account, thousand bucks, in minutes.

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That's how you grow your account.

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That's how you get over the PDT.

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So day two we're looking

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for that first 15 minute gravestone doji

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then we're looking for that high of day break,

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post 9:45 p.m, or 9:45 a.m, or so,

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a whole dollar, half dollar clause.

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And that tells us that the squeeze is officially on.

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Cause now, go back to my opening statement.

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Now the fire, the fire is lit, okay?

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Look at the volume, okay?

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This thing's trading 20 mill--

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these are 15 minute candles again,

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this thing's trading 20 million shares every 15 minutes,

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it's skipping up and the only reason, this candle exists?

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Cause you're probably gonna have a hard time

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selling into that candle, another gravestone doji.

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But do you wanna know why that candle has that wick?

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Look at that wick and look at the body.

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That entire wick is shorts, panicking, doing market buys,

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and they don't care what prices they buy it,

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cause they see their account going to zero

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or possibly below zero.

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So that's what creates the amazing amount of opportunity.

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And as always, if you're trade in these squeezes,

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you gotta have realistic expectations, okay?

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I'm not saying you would have sold at 60,

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but, maybe you sold at 45, okay?

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Maybe you sold at, the hell,

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maybe you missed (keyboard clacking).

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The gravestone doji

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and you sold at 35.

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It's still 10 bucks a share plus, then the stock,

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then the beauty of,

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it continues to squeeze in the afternoon,

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even almost reclaims the highs.

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So there was a 2:00 p.m move on Kodak as well.

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So, that's the biggest things to look for,

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the junkier the stock the better, ridiculous unusual volume.

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Look for stocks that have failed in the past,

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because Kodak has a history of failing

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and this might seem counterintuitive,

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but that's why we love day two, okay?

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You hear me talk about

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avoiding one and done charts all the time,

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Kodak is a one of them.

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But on day two, squeeze initiated, volume's there,

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breaks the high of the day, does the dip and rip,

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does a view uphold in the afternoon.

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I mean, there's so many ways to trade these

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and yes, there isn't one every day.

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But, when you catch one,

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and if you catch three of these a year,

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let's say you're ready, you're prepared,

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you know what to look for, you focus on day two, day three.

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And all of a sudden you got three or four trades a year,

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that may have, put you over the PDT.

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Let's say you started with five grand

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and all of a sudden, you nail three or four of these,

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in three or four trades you might be over the PDT.

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That's the power of these.

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And they repeat, they repeat, they repeat.

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We get, especially since 2016,

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ever since 2016, it's been the era of the short squeeze.

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BPTH is one, I mean there's just,

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I could go on and on, DRYS,

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I mean, there's so many of these things

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that went supernova,

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and that is the best way to grow your account.

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So, all right everyone, thank you.

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I hope you're enjoying these videos.

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I really enjoy kinda breaking up the white board

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and making the diagrams, to focus on the points.

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Let me on the comments below.

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Have you traded one of these short squeezes?

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Have you recognized these?

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And conversely, I won't pick on you, but I'm curious.

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Have you ever been trapped, in a short squeeze

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and have you done that panic buying

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only to see the stock rapidly reverse?

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I mean, may be who knows,

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maybe you bought the top at 60 on Kodak,

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you got panicked out and then it dropped 30 bucks a year.

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So, lemme on, I'm always looking to learn from all of you

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and again, check out all of our archive videos,

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talk about all of these patterns if I drop terms, okay?

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So if you hear me dropping jargon, check out the archive,

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cause there's probably a video or multiple videos,

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talking about the jargon.

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And as always check out the SteadyTrade Team,

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I would love to work with you.

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It's a small group. It's a great group.

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We all focus on being professional, businesslike.

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I show up in chat every single day at 6:00 a.m.

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Every day at 6:00 a.m to work with the team.

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I look forward to seeing you

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on the SteadyTrade Team webinars at 6:00 a.m.

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So, have a great day.

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