what does short interest signal 
short interest can provide insight into the potential direction of an individual stock as well as how bullish or bearish investors are about the market overall stock exchanges measure and report on short interest and issue reports each month providing investors a tool to use as a short selling benchmark a large increase or decrease in a stock s short interest from the previous month can indicate investor sentiment if the short interest for a stock rises from 10 to 20 it may be a warning sign that negative sentiment is growing toward the company as the number of investors who expect the stock price to decrease has doubled short interest can also be converted into a ratio also known as days to cover by taking the number of short shares and dividing it by the average daily trading volume the short interest ratio indicates how many days it would take for all of a stock s shares that are sold short to be covered or repurchased in the market if short interest is one million shares and its average daily trading volume is 100 000 shares it will take at least 10 days on average for the shorts to be able to cover their positions short interest ratio short interest average daily trading volumethis ratio indicates how many days it would take for all of a stock s shares that are sold short to be covered or repurchased in the market 