Technical signals are indicating the dramatic meme stock rally , driven by a short squeeze, could soon come to a painful end, according to Wolfe Research's Rob Ginsberg. A short squeeze occurs when investors who had bet against a stock by borrowing shares and hoping to buy them back later at a lower price luck out. These investors see the price move against them and instead try to limit their losses by buying back the stock. This then pushes the stock price higher. To that point, GameStop and AMC tumbled about 12% each premarket Wednesday. In the first two days of the week, GameStop and AMC had surged 179% and 135%, respectively. SunPower , another short squeeze candidate, dropped 19% Wednesday before the open, after surging 60% Tuesday. "As the past 3 sell signals highlight, we probably are a few days early before this group of stocks violently reverses, but we're close," Ginsberg wrote in a Tuesday research note. Wolfe Research said an index it manages with Nomura that measures stocks with high short interest this week "rallied into a lower high at long-term resistance." — CNBC's Michael Bloom contributed to this report.
