DEFINITION of 'Long Squeeze'

A long squeeze, which involves a single stock, occurs when a sudden drop in price incites further selling, pressuring long holders of the stock into selling their shares to protect against a dramatic loss. Less popular than its more famous brother, the short squeeze, long squeezes are most apt to be found in smaller, more illiquid stocks, where a few determined or panicking shareholders can create unwarranted price volatility in a short period of time.

BREAKING DOWN 'Long Squeeze'

Short sellers can monopolize the trading in a stock for a brief period of time, creating a sudden drop in price. The main reason why long squeezes are so rare is that value buyers will step in once the price falls to a point deemed "too low", and bid the shares back up. A rapidly falling stock, without a fundamental basis for the drop, will soon be seen as a "value" play, but a rapidly rising stock will be seen as increasingly risky with every upward tick.

RELATED TERMS
  1. Squeeze

    1. In financial terms, a period of time when borrowing is difficult. ...
  2. Bear Squeeze

    A change in market conditions that forces pessimistic investors ...
  3. Financing Squeeze

    A situation in which would-be borrowers find it difficult to ...
  4. Short Interest

    The quantity of stock shares that investors have sold short but ...
  5. Short Squeeze

    A situation in which a heavily shorted stock or commodity moves ...
  6. Weak Shorts

    Traders or investors who hold a short position in a stock or ...
Related Articles
  1. Trading

    The Short Squeeze Method

    The short squeezed strategy can be risky - but also very rewarding - for those who master it.
  2. Trading

    Short Squeeze

    A short squeeze refers to a jump in a stock's price, forcing a large number of short sellers to close their position, which in effect pushes the price even higher. When an investor shorts a stock, ...
  3. Trading

    Short Interest: What It Tells Us

    This figure can be a real eye-opener about the market sentiment surrounding a given stock.
  4. Trading

    Understanding Short Covering

    Short covering is buying back borrowed securities to close an open short position.
  5. Investing

    Rules and Strategies For Profitable Short Selling

    Short sales work well in bull and bear markets but strict entry and risk management rules are required to overcome the threat of short squeezes.
  6. Investing

    5 Popular Stocks with Short Squeeze Potential (FIT, GME)

    A short squeeze can lead to big gains and make your year (if the risks aren't too great). Here are five stocks with short squeeze potential.
  7. Investing

    5 Stocks With Short Squeeze Potential (GME,RIG)

    These five stocks have high short interest and short squeeze potential.
  8. Investing

    Why Short Sales Are Not For Sissies

    Short selling has a number of risks that make it highly unsuitable for the novice investor.
  9. Investing

    Short Selling Risk Can Be Similar To Buying Long

    If more people understood short selling, it would invoke less fear, which could lead to a more balanced market.
RELATED FAQS
  1. What is the difference between a short squeeze and a long squeeze?

    Learn about short long squeezes, the difference between short and long squeezes, and how investors and traders can be squeezed ... Read Answer >>
  2. How can I evaluate if a stock is a short squeeze?

    Determine whether a stock is a short squeeze by studying the catalyst that caused the rally. Traders need to determine whether ... Read Answer >>
  3. How is the short interest of a company related to a short squeeze of a company?

    Learn about the short interest and short squeeze, how to determine if a stock is a short squeeze candidate and how short ... Read Answer >>
  4. How does days to cover a short position relate to a short squeeze?

    Learn about days to cover and how it relates to a short squeeze. Smart traders can use this metric to help them avoid getting ... Read Answer >>
  5. What is the difference between a short squeeze and short covering?

    Learn about short covering and short squeezes, the difference them and what causes short squeezes. Read Answer >>
  6. What does "squeezing the shorts" mean?

    "Squeezing the shorts" refers to a questionable practice in which a trader takes advantage of a stock that has been short ... Read Answer >>
Hot Definitions
  1. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  2. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  3. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  4. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  5. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  6. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
Trading Center