Prepare for a Short Squeeze

Any time you see a sharp selloff in the first half of a session… especially in an emotional, news-driven tape… you have to prepare yourself for the high-odds potential of a last hour short squeeze.

6.29.12

Traders who have been in this game longer than ten minutes have seen the type of price moves as yesterday’s close many times before. Countless times, for some of us… and some were certainly far bigger in range than that. I can personally recall two times in the past where ES futures rallied 100+ index points from session lows to close after 3pm est. That would be 100 handles… 400 ticks up in the air, inside the final hour of trading.

Now it goes without saying these type of moves are somewhat common but don’t happen all the time. Nor does anyone ring a bell, send a tweet or post inside a message board that short-squeeze action is certain. Like anything else in trading, it’s all about reading the signs and trading around probable scenarios. The charts told you everything needed to know for yesterday’s close. If you know how to read = measure price action correctly, all emini symbols were flashing crystal clear short-squeeze potential warnings.

There are technical signs to heed and I will be discussing this type of thing (along with trend-continuation signs) in an upcoming public webinar on July 12th. It’s free of charge, open to the public and I’ll do my dead-level best to make your hour of time spent listening in worthwhile.

For more daily updates from Austin, visit his blog at Coiled Markets.