3 Short-Squeeze Stocks Ready to Pop

The Holy Grail of investing has always been spotting the bubble before it pops. Riding the wave of exuberance and selling out just before the market collapses has made billionaires and gurus, while leaving the rest of the buyers back where they started.

While most investors like to look for bubbles in stocks that Wall Street is hyping on the upside, most don't realize it can work the other way around as well.

 

Sometimes, a company can be so hated and be the target of so much negative sentiment, the herd piles on to push it further down. This is most commonly done through short-selling, or borrowing and then selling the shares with the promise to buy them back later. If the stock price retreats, then the short seller makes money.

But just as a market bubble can burst when there are no more buyers, a short-seller bubble can burst when there are no more sellers. You see, all the investors who borrowed the shares must buy them back at some point. If the company catches some good news, or at least less bad news as expected, then the short-sellers may not be able to find willing sellers without offering higher prices. This phenomenon is known as a short squeeze.  (more)

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