A short sale squeeze (or short squeeze) is a market event where a sharp rise in a stock's price forces short-sellers to buy back shares to limit their mounting losses, which in turn pushes the price even higher in a self-reinforcing cycle. Short squeezes are most powerful in stocks with high short interest, thin float, and a catalyst—such as a surprise earnings beat, a takeover announcement, or a regulatory win—that triggers the initial price spike. The resulting feedback loop between rising prices and forced short covering can cause dramatic, rapid price surges that far exceed fundamental valuations in the short term.
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