If you’ve been trading for at least the last few years, you’ve experienced some wild trends. One of the most prevalent has been “the short squeeze” trend. Thanks to companies now considered meme stocks, high short interest mixed with higher demand have led to significant moves in the market. AMC Entertainment (NYSE:AMC), GameStop (NYSE:GME), and others have surged in popularity (and share price) since the start of the pandemic.
DNA Of A Short Squeeze
Keeping things simple, a short squeeze results in a significant spike in price generally within a short period. Traders with a sizeable short position are forced out and must cover their short as bullish buying pushed share prices higher. Because of the velocity of the impending moves, traders who are part of a short squeeze have seen breakouts to the tune of thousands of percentage points. Even higher-priced stocks with smaller floats can experience similar instances.
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