text borrowed from Nate Pile on another stock that I own that is heavily shorted.
there has always been a sizable short interest in the stock. I think the important thing to keep in mind is that, at the end of the day, every share that is currently sold short will need to be bought back at a future date in order for those behind the trade to close out their positions.
In other words, for every share that has been shorted, there is a “built-in” buy order on the books waiting to be executed, and this means that once they decide to unwind their trade, in the same way that shorting the stock created “artificial” selling pressure that helped push the stock to the downside, there will be “artificial” buying pressure added to the mix.
And, while this circumstance in no way guarantees that a “short squeeze” will develop in the stock (“squeezes” are far less common than people like to believe they are), it does mean that once they decide to unwind their trade, the large size of the current short position should work in our favor to the upside… and, though it remains to be seen how the story will play out, I do sincerely believe that once the stock finally starts heading north again, the story has developed into one that is likely going to capture the attention of Wall Street
As they start the process of covering, they also get a chance to find out just how easy or not easy it is to buy large blocks of stock (i.e. they get a nice indication of how many institutional sellers are actually left in the marketplace in the current price range), and if it turns out they have “read the table” correctly, they will likely accelerate their buying to help give the stock even more juice to the upside, and this, in turn, usually ends up attracting new investors to the stock.
Bullish
