Short squeezes happen when shorts have to cover due to risk limits or margin requirements. Their covering impact is very aggressive (at times they're not even t

Short squeezes happen when shorts have to cover due to risk limits or margin requirements. Their covering impact is very aggressive (at times they're not even the ones covering, but rather their brokers or institutions), so it moves the stock. Then when things settle down, the people who are long can sell the stock more slowly. Also, there are several positive externalities to a rally. Stock price is something of a self-fulfilling prophecy, partially because companies can issue shares to raise money -- or use shares to buy another company. In some cases, a rally could lead a convertible bondholder to exercise and sell shares, effectively reducing the firm's debt. Even if this rally were to be short lived, short-sellers are unlikely to feel as comfortable selling the stock short in the future, and thus unlikely to impact the stock downward.