![]() Those that sized in huge were forced to take a huge loss. Those that had high expectations were let down. ![]() ![]() This is the classic situation where everybody expects it to ‘go to the moon’, but it didn’t. And it just didn’t matter how many traders wanted this stock to squeeze short-sellers, the supply was just too much for it to spike up. But this time, it just wasn’t the right stock. Some are even thinking of putting on even larger sizes to get that even larger win. With that mindset, they’ll step into the markets, hungry for the next stock. New traders don’t realize that buying short squeezes is a very tough strategy to master and that there will often be more losers than winners. Not knowing that the previous short squeeze happened because everything just lined up perfectly and it was a black swan. While they’re still high on their previous wins, they are eager to find the next one that ‘might’ give them a huge winner. It shouldn’t come as a surprise, as we all know it cannot last forever.īut this fact just wasn’t as clear to the newer traders and investors at that point in time. Everybody is just happy because of the seemingly endless uptrend. New traders are wiring in huge sums of money, thinking that they will be the next millionaire in no time because all they seem to do is win in the stock markets. New accounts are opened at an increased rate. As long as you bought the stock early on and did not sell or get shaken out in between, it is even more difficult to lose money than to make money. This is the phase where every new trader is making money. In late January 2021, we had GameStop.Companies took advantage of this and any of them who mentioned that they were working on a vaccine went on a bull run for weeks. In April 2020, the pharmaceutical companies benefitted from the fact that most people were eager for a vaccine to combat the COVID-19.It was led by $BPTH, which went from roughly $8 to $70 in just 2 days. In March 2019, the biotech industry caught some traction and started squeezing short-sellers.As opposed to the other sector momentum, there is a real demand for these marijuana stocks. Okay, I’ll say that this is a bit different because it was when Canada was almost to the legalization of marijuana. In August 2018, the cannabis sector lit up again.I can even remember that companies that had no history in the crypto industry getting enormous volume traded on the day just because they had the word ‘ blockchain’ in the press release. In December 2017, the blockchain/bitcoin sector was on fire and had penny stocks and OTC stocks all surging because of the demand.In November 2016, the shipping sector was on everybody’s screen and had terrible stocks spike up tremendously when the ticker $DRYS caught shorts.In most cases, it would even be the entire sector that moves together. And then some other stocks that are similar to this stock will surge in accordance with the pent up demand. The shittiest stock with the worst fundamental background can surge up to a few thousand % in merely a day. This is the week where everything just goes bat shit crazy. In hindsight now, $GME is just one of the market cycles that we are going through. It could be a different strategy altogether, it could be using smaller sizes, or it could even be a shorter holding period. Or at least they will tweak it just a little to protect themselves from what’s coming. This is also part of the reason why professional traders and hedge funds don’t utilize the same strategy all year round. And these human emotions form different market cycles. These can either be the traders behind the screen or even the algorithms. Not just that, I have mentioned before that the market fuels itself over and over again from human emotions. There will be a short squeeze that will happen one way or another, maybe not on $GME, but some other ticker that has similar fundamentals. The thing you need to know when trading the markets is that a short squeeze like that is almost inevitable. Okay, now that the GameStop ($GME) short squeeze craze has died down a little, I thought I’d break it down just a tiny bit further for better clarification.
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