Short Interest Theory

Short interest theory

The theory that a large interest in short positions in stocks will precede a rise in the market prices, because the short positions must eventually be covered by purchases of the stock.

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Short Interest Theory

In technical analysis, a theory stating that when an exceptionally large number of investors have a short position on a security, the price of that security will soon rise because those same investors will need to buy to close their positions. For example, if many investors have short sold a stock, they must soon buy that stock to repay it to the brokerage. This results in an increase in demand for the stock, which increases the price.