Risk Measures
A technical analyst who follows short interest theory would interpret very high short interest as:
Short interest theory: high shorts = bullish (potential short squeeze). Contrarian view.
Complete Analysis & Legal Rationale
Short interest theory is a contrarian indicator. High short interest is bullish because short sellers must eventually buy shares to cover their positions (short squeeze potential), creating buying pressure that could drive prices up.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
High short interest is interpreted bullishly, not bearishly, by contrarians.
Matches the verified teaching point in the explanation.
Short interest is considered to have predictive value by technical analysts.
High short interest may actually signal a buying opportunity to contrarians.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.