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Strategies & Market Trends : From the Trading Desk
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To: Dale Baker who wrote (2490)1/31/1998 2:37:00 PM
From: steve goldman  Read Replies (1) of 4969
 
Couple points:

1. Short squeeze - This is a bullish scenario where by a stock with a large short position is squeezed higher as a result of shorts buying stock to cover their short position. When a stock has a large short position and begins to move higher, those investors who are short might become concerned OR might have their firms call in the short shares they have borrowed. In covering their position, they have to go into the marketplace and buy stock which again creates upward pressure on the stock, furthering the concern of other shorts, forcing more short covering, again leading to addiitonal purchasing, etc. Its a cyclical event which often can push a well-shorted stock much higher on light volume. Vinik has made clear his interest in finding highly shorted stocks and trying to squeeze the shorts.

2. Overbought, oversold. = terminology referring to excessive conditions. A stock that would run from 10 to 20 in a short period of time and has a parabolic curve might be considered over bought as well, as stock that tanks from 20 to 9 over a short period of time wouldbe considered oversold. Technicians would argue that such stocks make efforts at rectifying the excess to some extent.

Regards,
Steve@yamner.com
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