Here's How I Scooped up 50% Profits in One Day Nate Bear, Lead Technical Tactician, Monument Traders Alliance Editors Note: It's do or die time for the Fed. August's PPI print sent the indexes soaring 5% in a matter of weeks. But that's nothing to what's coming down the pike on Friday, September 6, when we get the next employment report. Veteran traders Bryan Bottarelli and Karim Rahemtulla will be going live on Thursday, Aug. 22, at 2 p.m. EST to show you EXACTLY how to exploit this opportunity. We're not talking about a few percentage points. The last time this kind of event occurred, a backtested trade could have pulled in as much as 135.39% overnight! But with recent market volatility, this one could be a monster. Click here to sign up for this FREE Bombshell Jobs Report Live Event on Thursday. -Ryan Fitzwater, Publisher
Earlier today, I closed out Monday's Profit Surge Trader pick for a 50% profit. However, this setup didn't follow my typical buy high sell higher approach. Instead, I took a cue from the markets and went for a stock with so much explosive potential it could work whether the indexes topped out or not. This might sound like the Holy Grail of trading, but I'm going to show you that it's much easier than you think. These types of stocks are everywhere. You just have to know what to look for. The Magic Words I want to ask you a question…what moves a stock? Well, we know that earnings certainly do. Pretty much any major data can do that. But what about technically speaking? What can force people to buy a stock even if they don't want to? Two words - Short Squeeze. We saw the power of this concept in 2021 when GameStop mania grabbed national attention. For those who aren't familiar with the concept, let me offer a quick explanation. People bet a stock will move lower by borrowing shares from their broker, selling them on the open market, and then buying them back at lower prices. This is known as short selling or simply shorting. To close out a short position, these trades buy back the stock. The difference between buying and shorting a stock is the potential loss. - When you buy a stock, the most you can lose is when the share price hits zero.
- However, there's no limit to how high a stock can go. So, a short seller's loss could be infinite.
You can buy a stock without margin by using cash. However, you cannot short a stock without using what's known as margin. Margin is like a loan from the broker that allows you to buy or short stocks. Most traders use margin to gain leverage, where they can buy or short stock with a fraction of the total value, often as little as 25%. This can juice returns, but it will exacerbate losses. Brokers will initiate a 'margin call' when a trader's losses grow too large, forcing the trader to close their losing positions to stem the bleeding. When this happens to short sellers, they are forced to buy back shares to exit the trade. Doing this can cause the stock's price to increase, forcing more margin calls on short sellers, creating a cascade of buying from people who bet against the stock. This is what's known as a short squeeze. Brokers can also induce a short squeeze by raising the borrowing cost, not allowing people to short overnight, or simply not having enough shares to borrow. Finding a Candidate The chances of a short squeeze depend largely on the percentage of shares sold short. The higher the percentage, the more potential traders can be squeezed. Nearly every stock has some amount of its shares sold short. Typically, it's just a few percent. When you start getting into the double digits, and especially over 20%, that's when conditions begin to favor a short squeeze. Short squeeze data is available for free on many sites on the internet, such as Yahoo or Finviz. In the case of Forward Air Corporation (FWRD), it was around 20%. You may see sites reporting the percentage of shares sold short out of the total shares outstanding or the float. I use the float because that's the amount of shares available for active trading. Setting Up the Trade The core of a short squeeze setup is finding a place where traders have likely built up a short position while also making it easy to find where they placed their stop-loss orders. I have found this happens after a stock has run higher and begun to form a consolidation pattern. If its near 52-week or all-time highs, even better. As I said earlier, this one is different. Shares of FWRD broke down from $40 in March, bottoming out in May just above $10. They've been rising steadily since then, finally reaching the highs put in back in late March from the initial bounce in the start of the downtrend. If you where a short seller betting on this stock to go lower, where would you put your stops? Most of us would agree that former highs would be a natural spot. But in this case, it's even more prevalent because between there and $40 isn't a lot of price action. These 'windows' where very little occurred often provide little resistance to a stock whether it's moving up or down. If I was a short seller, getting into that zone would make me nervous. However, we're at recent highs, so you can bet traders will try to short here, hoping to catch the top. Taken together, this stock has the makings of a short squeeze. Now, as I mentioned earlier, this didn't follow my typical buy high, sell higher approach. That isn't exactly true. In reality, I simply calibrated my TPS setup to a lower timeframe work with this stock. You can see in the 5-minute chart above the setup includes the three elements of my TPS setup: - A clear up TREND
- A consolidation PATTERN
- And a SQUEEZE where the Bollinger Bands move inside the Keltner channel, as indicated by the red dots at the bottom
So you see, while the type of stock I selected changed, the setup remained the same. | 
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