Long Squeeze

AAA

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.

INVESTOPEDIA EXPLAINS '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. Short Squeeze

    A situation in which a heavily shorted stock or commodity moves ...
  2. Warren Buffett

    Known as "the Oracle of Omaha", Buffett is Chairman of Berkshire ...
  3. Value Investing

    The strategy of selecting stocks that trade for less than their ...
  4. Fundamental Analysis

    A method of evaluating a security that entails attempting to ...
  5. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  6. Noise Trader

    The term used to describe an investor who makes decisions regarding ...
Related Articles
  1. Warren Buffett: How He Does It
    Active Trading

    Warren Buffett: How He Does It

  2. Introduction To Fundamental Analysis
    Markets

    Introduction To Fundamental Analysis

  3. Short Selling Tutorial
    Active Trading Fundamentals

    Short Selling Tutorial

  4. Wall Street's Enduring Impact On The ...
    Investing Basics

    Wall Street's Enduring Impact On The ...

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center