What happened Shares of MercadoLibre (NASDAQ: MELI), the Argentine e-commerce star, have been inching up in price for the past three days -- but Tuesday's morning trading was something out of the ordinary. This morning, MercadoLibre stock jumped more than 5% initially, and it's holding onto the bulk of those gains (4.3%) as we round the clock into 11:30 a.m. EDT. But why? Image source: Getty Images. So what MercadoLibre stock has been a star performer in 2020, gaining nearly 140% in the last 52 weeks of trading. Such astounding gains have driven up the international stock's valuation to extreme levels, however -- 2,900 times trailing earnings, reports Yahoo! Finance. This fact has not gone unnoticed among short-sellers, who have sold short 4.9% of all MercadoLibre shares outstanding in anticipation of buying them back for big profits after the stock inevitably falls. Now what And yet, in a report that came out just yesterday, market research firm S3 Partners warned that investors who have sold MercadoLibre shares short are at risk of suffering a "short squeeze." Indeed, this squeeze has already begun, with MercadoLibre's rising share price forcing short-sellers to "cut their exposure by -12% as MELI's stock price rose +22%" over the last 30 days, reports StreetInsider.com. Adding to the "shorts'" panic, analysts at New Street Research just reinstated their coverage of MercadoLibre stock with a buy rating and a $1,450 price target -- more than 8% above where the shares trade today. Judging from today's 5% rise in share price, it seems S3 was right to warn investors about the perils of shorting a growth stock. 10 stocks we like better than MercadoLibreWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and MercadoLibre wasn't one of them! That's right -- they think these 10 stocks are even better buys. See the 10 stocks *Stock Advisor returns as of September 24, 2020 Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends MercadoLibre. The Motley Fool has a disclosure policy.Source