What is a Short Squeeze?
Short selling attracts many traders. There can be a sudden increase in the number of short sellers because the market sentiments hope for a price decrease. However, the price can move in the opposite direction and keep increasing because of the rush to sell and exit. That’s a short squeeze.
Trading Tesla Short Squeeze
Short selling is one of the well-liked Tesla trading options. For instance, in 2019 and 2020, short sellers traded Tesla stocks and raked in good profits. However, the stocks recovered and left short sellers with losses amounting to billions.
This squeeze isn’t the same as a gamma squeeze. Gamma squeeze Tesla prices involve market markers, not traders. It occurs from the market marker side, where a rapid increase in stock prices increases buying call for trading Tesla options. Consequently, market markers buy underlying stock as a hedging tactic.
Why Learn How to Read a Tesla Squeeze Chart?
A Tesla squeeze chart can help you escape a short squeeze or gain from it.
As such, it shows you the entry and exit positions if you’re into swing trading Tesla stock. Use this analysis tool alongside other data, such as market reports, to make better trading decisions.
How to Read a Tesla Squeeze Chart
You have to know your trading goal. As a few traders sell to cut their losses, others look for stocks that might undergo a short squeeze.
Think of a squeeze momentum indicator as a tool to measure how volatile the price increase and decrease are. It shows you the Bollinger Bands and the Keltner channel. The former calculates the price deviation. Thus, if you notice narrow Bollinger Bands, there’s price inactivity.
On the other hand, when they expand, the price is more volatile. What about the Keltner channel? It uses the Average True Range (ATR). This indicator signals a trend continuation.