Long Squeeze
From our last post about short squeeze, A long squeeze is the opposite of a short squeeze and happens when a stock or asset that has been heavily bought falls in price. While a short squeeze is when investors are forced to buy shares to cover their losses, a long squeeze is when investors are forced to sell their shares to cut their losses as the stock’s price drops. This selling can cause the stock’s price to fall even further, creating a self-fulfilling cycle that can lead to significant price decreases in a short period of time.
A long squeeze can happen when a company releases negative news or reports poor earnings, causing investors to sell shares and pushing the stock’s price lower. Additionally, long squeezes can be triggered by rumors or speculation about a company’s future prospects. For example, if a company is facing regulatory or legal issues, or if it’s facing intense competition in the market, it can lead to a long squeeze.
Unlike short sellers, long investors will suffer losses as the stock price falls, and their gains are limited to the buying price. Additionally, a long squeeze can lead to a margin call, where investors are required to put more money into their account to cover their losses, or they will be forced to sell their shares.
A long squeeze can also occur in other markets, such as futures and options, where investors can bet on the direction of an asset’s price. The long investors in a long squeeze can be individuals, hedge funds, or other institutional investors.
In conclusion, a long squeeze is a market phenomenon that can happen when investors who have bought a stock are forced to sell their shares as the stock’s price drops, causing the stock’s price to fall even further. This can lead to significant losses for long investors and can be triggered by a variety of factors, including negative news or rumors about a company’s future prospects. Investors should be aware of the potential risks associated with buying a heavily bought stock and should consider diversifying their portfolio to minimize their exposure to a long squeeze.
