What happened\nShares of Party City (NYSE: PRTY) were soaring today as the struggling party-themed retailer seemed to become the latest retail stock to benefit from a short squeeze.\nFor the third day in a row, shares were up significantly on unusually high volume. As of 2:47 p.m. ET, the stock had gained 21.4%.\nSo what\nThere was no fundamental news driving Party City shares higher. Instead, it seemed to be benefiting from similar behavior in meme stocks like Bed Bath & Beyond and GameStop as traders have banded together on forums like Reddit's WallStreetBets to execute a short squeeze and drive the stocks higher.\nParty City wasn't getting any attention on WallStreetBets, but traders on Twitter were noticing its sudden gains.\nAs of July 29, 18% of the stock was sold short, which seemed to be enough to set it up for a short squeeze, which happens when short sellers help drive the stock price higher by buying it back to close out their bets against the stock. As of 3 p.m. ET, more than 32 million shares of Party City had changed hands, which compares to a daily average of just 3.7 million over the last three months.\nThe rally seemed to begin on Monday with a gain of 13% on modestly higher-than-normal volume, and yesterday the stock jumped another 29% on trading volume of 24 million, showing the surge picking up steam.\nNow what\nFears of a bankruptcy have battered the stock, but it finished the second quarter with nearly $200 million in liquidity and break-even free cash flow for the first half of the year, indicating it's not about to go out of business. The retailer has struggled for years under a crushing debt burden and as consumer demand shifts away from brick-and-mortar stores.\nIt's possible that the short squeeze could breathe new life into the stock, which happened last year with GameStop and AMC Entertainment. Both companies were able to raise cash by selling new shares at higher prices. It's unclear how long the Party City short squeeze will last, but the recent boom in shares for Bed Bath & Beyond shows it can go on for several weeks if trading activity pushes it higher.\n10 stocks we like better than Party City Holdco\nWhen our award-winning analyst team has 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.*\nThey just revealed what they believe are the ten best stocks for investors to buy right now... and Party City Holdco wasn't one of them! That's right -- they think these 10 stocks are even better buys.\n*Stock Advisor returns as of July 27, 2022\nJeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Twitter. The Motley Fool has a disclosure policy.\nThe views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.