Fridays are one of the most important days to trade.
We can see wild short squeezes as short sellers look to exit their positions before the weekend.
They do this to avoid extra fees and the risk of weekend news impacting their positions.
When short sellers overcrowd a stock and then start buying to cover, it can create a melt-up of buying and spark big gains in the process.
If you know what to look for you can take advantage of this big upward move and ride the short squeeze.
Here are the criteria to look for today…
Use them to help you spot huge afternoon runners. They could also help you lock in some gains on one of the best days of the week to trade…
Unlocking Friday Short Squeezes: A Guide for Part-Time Traders
Friday afternoon trading is one of the most important times to trade.
If you’re a part-time trader, you should be laser-focused on Monday mornings and Friday afternoons. They’re prime times for big moves in the market.
And since it’s Friday, you’ll want to look for stocks with these criteria…
Hot Sector
First off, look for hot sector stocks with news.
AI is the hottest sector we have right now.
But you won’t see penny stocks have NVIDIA Corporation (NASDAQ: NVDA) type moves. They won’t trend upwards for months…
Instead, you’re going to see sketchy penny stocks pop on news headlines. Then you can see a lot of volatility with big green and red daily candles.
That means timing your trades is more important. Focus on looking for patterns like with a morning dip and rip or afternoon VWAP hold.
Hot sector stocks with the most volatility and potential for a Friday squeeze will also have two crucial components…
Low Float and High Volume
Low float stocks with high volume and float rotation have the most potential to skyrocket.
That’s because there’s a large imbalance between supply and demand.
There is low supply and high demand. And float rotation means new buyers are coming in willing to pay a higher price for the stock.
In the case of Friday short squeezes, it’s usually the stubborn shorts that create the wave of buying.
To find a stock that’s loaded with short sellers and can create a squeeze, I like to look for stocks that hold up for multiple days.
Multi-Day Runners
When a penny stock has a big move on news, and then holds near its highs — that tells me it’s loaded with short sellers.
They’re trying to push it down but buyers keep holding it up. And if shorts don’t get a big washout to cover into, they hold until the stock hits their risk level.
That’s usually at a red-to-green level or a daily, weekly, or monthly high.
Once a stock breaks a key technical level, it can be off to the races for a big squeeze. But we always want to wait for confirmation before jumping into a trade…
Technical Confirmation
On Fridays, we love to see stocks retesting the week’s highs.
This signals strength, especially when combined with a whole-dollar or half-dollar break. These levels can trigger excitement among longs and panic among shorts — the perfect recipe for a squeeze.
When trading these setups, it’s crucial to have a clear risk-reward plan. Identify key support and resistance levels to guide your entries and exits.
And remember, it’s okay to exit if a trade doesn’t go as planned.
Focus on realistic expectations and don’t let greed cloud your judgment.
Keep these lessons and criteria in mind when looking for a trade today.
They could lead you to an epic Friday short squeeze.
If you struggle to find stocks with the most potential, I can help…
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Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade