Open Interest
Open interest only rises when a new long meets a new short, and falls when positions close. Crossed with price direction, that yields exactly four situations — and each one reads differently.
New longs (price ↑ OI ↑)
Price climbs and open interest climbs with it: fresh money is entering long. The move has fuel — the healthiest form of an uptrend.
Weakens as soon as OI flattens while price extends.
Short squeeze (price ↑ OI ↓)
Price rips higher while OI drains: shorts are buying back, not bulls entering. Violent but self-consuming — the move ends when the last short covers.
Turns into OI-01 if OI starts rising on the way up.
New shorts (price ↓ OI ↑)
Price falls and OI grows: fresh shorts are pressing with conviction. Real downtrend pressure — bounces are for selling until OI stops building.
Weakens when OI flattens during the decline.
Long capitulation (price ↓ OI ↓)
Price falls while OI drains: longs are giving up and closing. Selling from exits, not new conviction — watch for the flush that ends it.
Turns into OI-03 if OI starts rising into the fall.