Carver Bancorp (CARV) Flies As The Shorts Are Squeezed

Carver Bancorp (NASDAQ: CARV) is screaming for the top in the premarket hours this morning, trading on gains of more than 20% after yesterday’s run of more than 100%. However, with no news or press releases issued by the company, many are wondering why the stock is flying so high. 

Here’s what’s going on:

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Retail Investors Push Back On Hedge Funds Once Again

The year 2021 has become the year of the retail investor. The year when the retail investor makes the big plays that make the market move to the demise of the institutions. 

We saw it earlier in the year with names like GameStop, BlackBerry, and AMC. Now, retail investors seem to be flexing their muscles with CARV stock too. 

Ultimately, it’s all about the short squeeze. 

When an institutional, or retail, investor shorts a stock, they borrow shares from long investors and sell them immediately in the open market. The goal is for the price of the stock to fall so that shares can be repurchased and returned at a lower rate, generating a profit. 

However, when prices rise, short sellers start to lose money. When there’s heavy short interest on a stock, and the price begins to rise, these short sellers race to purchase shares and cut the bleeding in what’s known as a race to cover. 

Throughout the first half of 2021, retail investors have been looking for stocks that are heavily shorted by institutional investors, and banding together to purchase shares of those stocks with volume that even the institutions can’t compete with. 

When this happens, prices climb dramatically and short sellers have no option other than to abandon their positions. 

That seems to be exactly what’s happening with CARV stock today. 

Recently, the stock traded with a short percent of the float as high as 20% as institutions began betting against the company. However, those short positions are likely to be squeezed out with the retail community piling into the ticker. 

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The Bottom Line

While CARV hasn’t released any news, they didn’t have to. The bottom line is that the retail community sees the stock as a perfect short squeeze target, and are acting to make that squeeze happen. Keep in mind that short squeezes are generally short term, high volatility runs. So, if you plan on playing this run, be sure to do so with caution. 

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