A GameStop analyst shares how to successfully spot the short squeezes that send meme stocks to the moon – and warns of a common shorting mistake to avoid

• GameStop shares rocketed 800% this year after a meme-fueled short squeeze shocked Wall Street.
• Hedge funds mismanaged risk by continually shorting the stock, which further fueled the trend.
• Longtime GameStop analyst Michael Pachter shared how to spot squeezes and successfully short stocks.

GameStop (GME) captured the world’s attention in late January and early February when it soared “to the moon,” as the army of individual investors that waged war on Wall Street like to say.

The video-game retailer’s miraculous run came as a ragtag sect of small-time traders banded together over online forums like Reddit and bought GameStop shares, which hedge funds believed would crater as the company wilted like defunct movie store Blockbuster.

The sudden buying triggered a short squeeze where short sellers, who borrow shares of companies they deem overvalued in the hopes of buying them back cheaper and profiting, bailed on their bearish bets and instead bought back shares to cover their losses.