Short Squeeze

A short squeeze occurs when a heavily shorted stock's price rises sharply, forcing short sellers to buy shares to cover their positions, driving the price even higher. This often leads to a rapid price surge as more short sellers rush to buy shares, creating a feedback loop that intensifies the upward momentum. Short squeezes are typically triggered by positive news or strong buying activity and can result in significant losses for short sellers.

Example

If a stock with heavy short interest experiences unexpected positive news, its price might spike, forcing short sellers to buy shares to limit their losses, pushing the price even higher.