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Trading Lessons

How To Ride A Short Squeeze

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Written by Timothy Sykes
Updated 3/29/2024 6 min read

This is one of the biggest opportunities for small-account traders right now:

The short squeeze.

These stocks can spike +100%, even +1000%. And in this 2024 market, we’re seeing new short squeezes every week. Partially because the stock market is so hot! Let me explain …

Three out of four stocks follow the market. When the market is hot, there are more stocks that spike. The bullish momentum works against short sellers from the very beginning.

Take a look at the S&P 500 ETF Trust (NYSE: SPY) this year. On the chart below every candle represents one trading day:

SPY chart multi-month, 1-day candles Source: StocksToTrade

That momentum trickles down to our small-cap niche. That’s where we find cheap stocks that can spike +1000%.

Notice how the SPY spiked 12% this year. That’s because the SPY is trading above $500. It’s more difficult to spike by a big percentage.

Comparatively, a lower-priced stock can spike higher because the original price is so cheap. Take a look at Cazoo Group Ltd. (NYSE: CZOO) below, share prices were trading under $3. And prices hit $20 intraday yesterday.

Every candle represents 10-minutes:

CZOO chart multi-day, 10-minute candles Source: StocksToTrade

Small-account traders can bank off of those big percent gains!

Here’s how …

The Short Squeeze

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In case anyone is still confused:

A short squeeze happens when there are too many short sellers in a stock. Any bullish momentum from the stock can cause some short sellers to panic and buy-to-cover to exit the position. That bullish momentum creates a domino effect of short sellers blowing up.

How high the squeeze goes, nobody knows. Short sellers can keep trying to guess the top and can keep blowing up. For that reason, theoretically, these stocks could run to infinite highs.

But the stock will crash eventually. There’s a lot of money on the table for a short amount of time.

So we have to be careful while trading these plays.

The CZOO spike is unsustainable.

I already traded it for a profit. And I’m looking for another trade opportunity. But I’m NOT holding shares of this stock.

My trade notes are below, I had a starting stake of $16,365:

Source: Profitly

The stock spiked 120% the day that I traded it. I took a 7% profit.

That’s how to play these stocks. We take the meat of the move. I try to trade the most predictable part of the run, then I get out and I move to the next play. It’s not about making $1 million on one trade. I’m trying to maintain consistent profits for the rest of my life.

I love that trading is my job.

The Process To Profit On Short Squeezes

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We need to identify strong price action on a stock that’s running without any news.

That’s right … On paper, CZOO is running for no reason.

That’s what attracts degenerate short sellers. They see a stock that’s spiking but has no business spiking. They stubbornly pile in, and then they get squeezed.

Now, remember: The spike will end eventually. So we want to confirm the bullish price action before we plan a trade. In the case of CZOO, I traded it on the sixth day of the move. The short squeeze had plenty of time to wind up and build momentum before I snagged a cool $1,275.

The patterns that I use to trade these runners are the same.

The patterns repeat because human beings are predictable during times of high stress. And short squeezes can be incredibly stressful if you’re on the wrong side.

Here’s the catch …

Every squeeze looks a little different. Like a snowflake.

If they all looked the same, this process would be easy as pie and everyone would be a millionaire.

It takes experience and practice to get used to. But there is a science to this. These are real profit opportunities. In my career I’ve pulled $7.6 million in profits from the market using these strategies. I also have over 30 millionaire students who use the exact same process.

We outline these plays in daily webinars for all of my upcoming students to see.

The market is closed this weekend. And that means it’s the perfect time to prepare! Watch the videos that I linked above in this blog post.

And if you have any questions, my students and I are available all weekend:

Tune in to the weekend chat and hit us up.


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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”