How To Trade A Short Squeeze

00:02 - I’m up $1,100. That’s a very small gain day for me, but you know what I told you yesterday since I had a losing day, actually to losing days in a row.

00:14 - I was very much concerned of having another losing day today and I was really trading smaller size, much smaller size, and taking less risk and waiting a little bit more and being more careful and you know, I really have to winning trades in MARA and the rest of relatively small losers.

00:34 - So, end of the game for me today is a little bit up.

00:39 - So, it’s not about being up today. It’s about what happened; and let’s talk a little bit about MARA here because I think it was kind of interesting to understand something that you know, usually we don’t we don’t always see that and let’s talk about short squeeze and before we talk, about short squeeze, let’s take a look at the daily chart of MARA here.

01:04 - If you look at the daily chart of MARA you can see that just recently the stock moved up quite a bit.

01:09 - I mean just go back a month and a half ago, the stock was at $2 and it’s now topping at $21.

01:18 - I don’t know if it’s topping… It is at $21 right now. So it’s $2 to $21? I mean, that’s a huge upside move right? Now, what can happen next I don’t care and I don’t know what the reason this stock, this company, moved up that much from $2 to $20 something…

01:38 - I don’t know I don’t care. The thing I do care about is the technical opportunities that we have in the stock that is doing that big move.

01:46 - Now, when you have a stock that is doing a big move like that there’s two options here and we used both today and it’s quite rare that we use both.

01:53 - One was shorting it. The reason we want to short a stock that is up, flying up, as much as as MARA here is because it’s extended on the daily, very extended on the daily, and therefore there will be a lot of profit taking so took the opportunity today to short it until $19. 50 right over here that worked out fine.

02:15 - It was my first trade in MARA and that worked out OK.

02:17 - But, as you can see it change direction. Now what happens when a stock like that is changing directions? What happens is another opportunity and once the stock like MARA moves over the highs.

02:32 - That is what we call a short squeeze or likely to become a short squeeze.

02:37 - Why is that? I’m not the only person that when short here. There’s a lot of people whom I don’t know if they’re doing the right thing or not could be short and waiting for it to come back down to zero. Maybe to $2 maybe to $10.

02:51 - There’s a huge opportunity here for people who know what they’re doing.

02:54 - I’m not one of them. I’m it’s not my game too short MARA now and to wait until it comes down to $10 to $15 or $2.

03:03 - In order to do that you need to understand a little bit more about what the company is doing.

03:08 - What’s the chance of a stock like that moving back down? I mean spiking up from $2 to 20 something dollars.

03:15 - That’s not very likely to stay there usually stocks like that.

03:19 - Don’t really survive these heights. Usually they would come back down.

03:23 - So if you’re going short, you’re probably a professional.

03:30 - Not my kind of professional because I’m a day trader professional.

03:33 - I would stay there for a few minutes maybe few hours, but there are some companies usually hedge funds big money hedge funds that would short that it and it’s not just them it’s big traders who showed it and guess what most of them are using margin because short sellers are professionals and professionals usually use all the margin that they can get.

03:55 - Why? Because they usually make money and usually when you make money regularly you want to use more and more margin because you just multiply your profits.

04:05 - So most of them are using margin. Now, what does that mean? It means that on the contrary if the stock is moving higher a lot of investors are buying it are not necessarily using margin or some of them are using it, but not that much. On the other end, when stock is coming down.

04:22 - you’ve got big players who are using a lot of margin, now when MARA is coming down, the big players are moving in large size now you take a look at the daily of the stock again oh sorry, not the five minute, the daily, when the stock is intraday moving over the highs, which it’s just did and that was our second trade, the long trade, then a lot of these short sellers.

04:50 - I mean some of them at least, not all of them, but I don’t need all of them.

04:54 - I just need the small part of them. I just need you know, a lot 10% of them closing down their short positions which are usually on margin in order for the stock to to move higher and to push more and more short sellers.

05:09 - It’s moving up right now. It’s not a huge move up but take a look at what happened there.

05:14 - Well first, you know, I call this long opportunity here over $20. 40, which was right over here.

05:19 - Just take a look at the technical formation of the stock.

05:22 - There’s a nice inversed head and shoulder formation here.

05:26 - That’s the left shoulder, the right shoulder, a bit more than the right shoulder.

05:30 - Even a small cup and handle formation here and there is the head of course right over here.

05:34 - So there’s a nice technical formation here.

05:37 - Look at what happened when it moved over the highest look at the volume.

05:40 - Once it moved over the highs. So you can see that there were some interesting technical formations here and also a move over the highs after you could guess as I was earlier that there will be some short sellers taking it down.

05:55 - So you would expect high volume, not just of the people who are going long MARA, but also of the people who are closing down their short positions. You close the short position, you are actually buying the stock you short earlier, so you shorted, you sold it, now you’re buying it and therefore it’s very very likely for the stock to move over the highs nice volume as you can see here over the highs and very, very likely now to continue.

Keep an eye on MARA. This could be an interesting trade.

06:29 - Not necessarily to the long side. I mean that was an intraday move for me and there could be an intraday tomorrow to short it again, depending on what it will do if it’s going to behave like it did earlier today, when I shorted it, I would gladly short it if it’s going to move over the highs, I would gladly move long.

06:50 - So again, just remember this intraday formation and the combination of the intraday and the daily formation, now if you watch BTBT, it’s also kind of the same idea. The stock was at ,I don’t know, $4 moved up to $33 and now trying to find a direction.

07:11 - So again, we had some trades in BTBT today, I did not have a very good trade in BTBT, but we will still be following it in the next few days.

07:21 - So open an eye on MARA and on BTBT. Remember the short squeeze ideal, the way the short sellers are being squeezed to close their margin because they usually both the money those who need to close it relatively quick.

07:39 - And then at that point you’re supposed to be going long.

07:42 - That’s the main idea. Anyway, that was probably the most interesting two trades I took today and I hope that was interesting for you guys.

07:50 - So I’ve just have a good day. Have a great day.

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08:03 - Thank you very much for doing that. And the rest of you, I’ll see you all tomorrow.

08:08 - We have the last trading session of the week tomorrow and just do well.

08:13 - See you. Bye traders. .