What is a Pip-Squeak Pop

Pip-squeak pop describes a sharp rise in the price of a stock, usually from an already low price and market valuation. It is slang term associated with penny stocks, which typically trade for $5 or less per share. A pip-squeak pop generally applies to an instance where a stock moves significantly higher in a short period but does not double or triple in value. 

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What Is A Pip?

BREAKING DOWN Pip-Squeak Pop

Traders of penny stocks often use the term pip-squeak pop when a holding climbs 25-50%, which would in most cases be considered a significant increase. However, penny traders generally seek returns far greater when investing in such stocks. Pip-squeak pop has also been known to be used by forex traders, referencing a small move by a currency in a favorable direction by a few "pips."

Penny stocks represent a small but alluring segment of the stock market. Due to their low price, investors with little cash to invest can purchase a significant number of shares and can earn substantial returns from a small move in the stock price. Company R2D2, for example, may trade at $0.50 per share. An investor could purchase 1,000 shares for $500 plus commission and if the stock were to experience a pip-squeak pop and rise to $1, they would earn $500, doubling their investment for a 50-cent move.

Limitations of Pip-Squeak Pop

Yet penny stocks are cheap for a reason. They carry a high degree of risk due to light regulation and low listing standards compared to larger stocks and trading characteristics unique to their small size. Penny stocks have less liquidity than larger stocks, which causes them to have wide bid-ask spreads between the price a buyer is willing to bid and the price a seller is willing to accept. They also trade over-the-counter rather than on a regulated stock exchange or electronic communications network. Exchanges require that stocks maintain a minimum level of daily liquidity, or trading volume, and file regular financial statements with securities regulators but parts of the OTC market, such as the pink sheets, have no such rules.

Penny stocks are not followed by sell-side research analysts due to their size and risk, which can have benefits for buyers in uncovering mispriced securities poised for a pip-squeak pop. These stocks, however, could just as easily decline sharply and become worthless due to lack of market participants will to take the other side of falling knife. Investors are advised to proceed with caution when investing in penny stocks and not let the attraction of a quick profit lead to a reckless investment.