The Parabolic Short Squeeze Setup

We can get short squeezes, but some of the LARGEST and BEST PARABOLIC SHORT SQUEEZES typically come after Day 3 shorts are triggered into the market — Low of week and Low of the month.

Not all will be the same size, but if we have a three day setup, these are the trades I watch and wait for. One of these every few weeks can have a significant impact on your overall results.

Example: double reset

Day 3 shorts in the market. This short squeeze reversed at the HOD, and became a Day 2. The Day 3 shorts became a reset. An even larger Parabolic Short Squeeze came three days later.

Mechanical rules — Parabolic Short Squeeze Setup

01Day 3 breakout traders shorts triggered into the market. This day should/could close as a false break reversal day.
02Creeping trend that trades back to the peak formation LOW on the same day or the next day.
03Consolidation that should engulf and give an entry in the timing window (London, New York).
04An entry can be taken by a close back inside, or sideways price action inside the 20 EMA in the timing window.
05Currencies: max stop loss of 20 pips (or smaller). Gold, oil, indexes: can be 25.
06Profit Target can vary from 50 pips to 250 pips or more depending on the instrument and setup.
07NOTE: If there is Major Red News scheduled for the session that is potentially giving the entry signal, I will look to trade the First Bounce Entry.