Some stocks like Tesla (TSLA) rally because of good news on earnings or material outlook. Other stocks like AMC or GME throughout 2021 rallied because of short squeezes. It's important to distinguish between these two rallies because a short squeeze might go much higher but burn out faster. The last thing a day trader or swing trader wants is to wind up on the downside of a "pump and dump" play. Sometimes a penny stock will shoot up astronomically for no apparent reason in one day. But if you look deeper, you'll find it's a short squeeze that only lasts a matter of hours, and then the price comes plunging back down. The ideal short squeeze is like the GME run, driven by more than over-shorted shares, as buyers were passionate about holding the stock. A high ratio of short shares can push demand higher for short-sellers. A good indicator of a shorted stock that's ready to squeeze up is one in which the number of shares short is over five times the average daily volume. Short interest above 10% is usually where you start finding good squeeze candidates. An often overlooked indicator is whether the number of short shares increases, which is suitable for long buyers. In many cases, short squeeze setups don't play out as rallies and equate to head fakes. So don't think that squeezes are automatic or even easily predictable. Many new young traders rode the GameStop squeeze without even knowing what a squeeze was, as they were simply fans of the company. Both AMC and GME had bullish catalysts to help drive the stocks up during their huge runs in 2021.