Shorts get squeezed as market rally ramps up
The rally seems to have sent the shorts scurrying from some of their favorite recent targets.
Short sellers seem to be beating a hasty retreat from stocks they had their sharkish eyes on recently, as the markets rose to respectable gains before the White House announcement on new tariffs, due after the close.
The gains among heavily shorted stocks like SoundHound AI and quantum computing play Rigetti Computing were fairly massive, suggesting that the short sellers who’d been building sizable positions in those companies are rushing to exits in something of a squeeze. Another stock we’ve spotlighted recently because of a rising in short interest — Etsy — is also up significantly. So too is EV infrastructure company ChargePoint.
As a refresher, when someone shorts a stock, they borrow it for a fee and sell the share with the intention of buying it back later at a lower price. If the trade works, they pocket the difference between the price they sold at and the price they repurchased the stock at.
But to exit the trade, they must buy the stock, at any price. And when a large amount of short sellers tries to exit a trade at the same time — a dynamic that gets supercharged when the stock rises and inflicts a loss on the shorts — it can cause a sharp spike in the stock price, known as a squeeze. That seems to be some of what’s going on today.
