The total number of shares sold short as a percentage of the float — a measure of bearish positioning that, at extremes, can signal contrarian opportunity through short squeeze dynamics.
Deeper Explanation
High short interest means many investors have borrowed and sold shares, betting the price will fall. When they are wrong — when the business reports better results or receives positive news — they must buy shares to close their position (a short squeeze). This forced buying amplifies positive price moves, rewarding contrarians who bought into maximum bearish positioning. Monitoring changes in short interest is equally important: rapidly rising short interest that exceeds normal levels in a fundamentally sound business often signals that a bearish narrative has become consensus — the conditions under which contrarian trades are most powerful.
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