Shorts Sellers Got Stuck in a 130% Short Squeeze transcript

What's up, everyone? All right, in today's episode, I'm going to walk you through a 130% short squeeze. The move began in the after-hours session yesterday and continued into pre-market this morning with the stock continuing to move higher. What is interesting is that this stock is easy to borrow. That means it is free to short it. You do not have to pay locate fees. I generally find that when a stock is listed as being easy to borrow, it means there's so many shares available to sell that they they can't even charge you for it.

So, they make it free to borrow. And when it's free to borrow, naturally, you'll have a lot of short sellers who say, "Well, I don't have to pay any locate fees. I might as well short it and see what happens." Well, that's what ends up occurring and we as a result typically see more resistance as the price is moving higher. So, it's not able to give us these really big clean parabolic moves unless shorts get trapped and then they're forced to cover.

So, on this stock, we got a news headline that came out in the after-hours session about a merger, merging two companies together, $750 million business combination. Um this is not an uncommon catalyst. We do see this quite often, especially in the small-cap space, um two small companies merging to create one big slightly bigger company. So, really nice move in the after-hours session, as you can see right here from about $2.20 all the way up to 434.

So, it goes up about 100%. Pre-market, it sells off right away. Kind of starts to look like it's doing an inverted head and shoulders pattern, but then it doesn't pull away. It pulls back a little bit longer, kind of a little longer sideways, and then it starts stair-stepping up here around 7:00 a.m. So, at this point, this is when I start to watch it. Pulls up to through the VWAP, volume weighted average price, up to a high of 390, dips back down, squeezes up to double top with the pre-market high right there at 434.

Pulls back, pops up, and flushes back down. Sellers bring it down. Then it comes back up, rips through the high, and then sellers pull it back down. And then at the open, it rips up. Is it going to reverse? No, it goes a little higher, and then it drops back down. And now it's kind of, you know, softening. So, the issue here is that every time it comes up against resistance, you've just got a wall of selling because it is easy to borrow.

There's lots of shares out there. Even though it's only a 1.8 million share float, they've market makers or clearing firms have determined that this is okay to borrow. So, that typically to me, when I see it's easy to borrow, I put sort of imaginary guardrails on how much the stock can go up. Because typically shorts are going to hold it back. Now, there are exceptions to that. Is this one going to be the one? I'm not really sure.

Yesterday was actually a pretty strong day. We had FTFT at the open that squeezed up, and as the day went on, the thing kept going higher. So, FTFT was really strong yesterday, and I think that probably ignited a little bit of FOMO in the market for some type of pop at the open today. I didn't expect it to be VEEA or VEEA though. Because here's the thing with FTFT yesterday. Pre-market it had a total of, let's see, I'm going to grab the chart.

So, it had total of about uh before that candle, it was about 4.7 million shares of volume during the pre-market session. And it was only up like 6%. It wasn't up that much. And then the bell rings, and it surges. So, when I looked at VEEA, and I saw that, well, during the pre-market session going into the open, we already had in excess of 30 million shares of volume, I felt like, you know, I just don't know if this thing's really going to pull away.

I'm I think it's going to be too crowded. As I was looking at the level two, it was very thickly traded, big stacks of buyers, but also matched by equally big stacks of sellers. And the result is that when you have a stock that's that thickly traded, they don't usually open up. They don't move very quickly. So, I did not trade VEEA. In fact, I did not take any trades today in either my big account or my small account.

I just didn't Well, so I'll talk about the small account in a second. But on VEEA, I just didn't feel confident. You could see right now, it actually is not as thickly traded as it was earlier. And that speaks to a bit of a phenomenon that we see at the open, where stocks go from very thick in the pre-market to a little thinner because of market makers taking advantage of stop orders and market orders. But SUGP, see how thickly traded this is?

Big stack of buyers, big stack of sellers. For this to even go up 15 cents would be I mean, it would be huge. It's got 90 million shares of volume, and it's just going sideways. Well, that's the same as how F Sorry, VEEA looked this morning. It was very thickly traded. Now, it's thinned out a little bit here at the open. Uh but unfortunately, not enough for me to feel confident trading. VT FTFT, this one's not moving quite as much.

It's only got 4 and 1/2 million shares of volume. But traders were kind of looking at that one this morning as well, and I thought, you know, why? Because it made a big move yesterday. Well, but isn't it clear that this is sort of a the backside of this move, right? I mean, it'd be very uncommon for this to go all the way back up to here and push higher. Even in a hot market, that's pretty uncommon. And we're not in a hot market.

Yesterday was warm, and today feels a little cooler. And that's typical. Sort of warm, cold, warm, cold, warm, cold. Maybe two cold days and a warm day, three cold days and a warm day, then maybe two warm days in a row, then a only sort of cold day, and then four warm days in a row, and then we start to see that shift. But right now, it's still a bit on the colder side. So, I decided FTFT, no interest in that. VEEA, didn't feel like it was worth it.

SUGP, however, now this one I felt differently about. Once this broke over a dollar right here, I punched it. I said, "You know what, small account, I'm going to punch it, and let's take a look at what happened." Boom. Order rejected. Why? So, your limit is significantly higher or lower than the last traded price. Confirm you're trading the correct security. I had a 15 cent offset, which meant my limit it was the current price was about a dollar and four cents, and my limit was for 15 cents above that.

So, a dollar five plus 15 is a dollar 20. If you put an order more than 10% above the current market price, they automatically reject it and tell you to double-check it. Now, I did intend to send the order at that with that offset, but it got rejected, and that's because of the hot key setting I've used, which is a 15 cent offset. So, I ended up missing that trade, and as you can see right here, it broke a dollar and went all the way up to a dollar 20.

Now, I wouldn't have wanted to get in at a dollar 20. I suppose if we're going to be honest, that offset was a little too high, but that's just what I've had hard-coded for my uh hot keys. For a stock like VEA, 15 cents is no problem. Again, not that I really wanted to get the full 15 cents of slippage, but if something's moving quickly, I you know, that's just what I've historically allowed it to fill me at, and I it's been okay.

So, unfortunately today, that one trade didn't end up working uh for that sort of silly reason, and then after that, it got very thickly traded. My thought was that maybe this thing breaks a dollar 25 and squeezes up to a dollar 50, but it didn't do that, and so then I said, "No, I I'll now I'm not interested in it." So, SUGP is our second leading gainer, very thickly traded, no more interest in that. MYSZ, 18 million shares of volume, moved after hours, continued at 4:00 a.m., and then sells off.

Uh we had a couple other stocks that popped up. We had uh just after the top of the hour, CSAI. This one had news at 9:00 a.m. but interestingly, it didn't pop until 9:15. So, that was a little strange, not sure why. Um there were a couple other stocks, B BNRX, I think, or BRNX. Um this is a energy Israeli energy stock. So, popped up for a second, sold off. They had a headline here, uh but it seems like it's a it's some type of settlement with a bank, so wasn't really sure what that all meant.

Uh and so, you know, at the end of the day, end of the morning here, I just didn't see anything I liked. ERNA pop, reverse, news, no, you know, no good, not sure. So, unfortunately, today was a bit of a miss, but uh you know, that at least for the pre-market session, but look, I'm okay with that. I just got to be patient. You know, yesterday was a good day in the small account. Uh you know, and I just got to show up every day because you never know when you're going to have another good opportunity.

So, so let me remind you guys, as always, my results are not typical, trading is risky, and please practice in a simulator before putting real money on the line, and I'll see you guys back at it streaming at 7:00 a.m. tomorrow morning.