Definition of "Cushion Theory"

A theory which asserts that if many investors have short positions in a stock, the stock's price must inevitably rise because the short positions must eventually be covered by purchases of the stock. If the number of short positions in a stock is twice as high as the stock daily trading volume, most technical analysts will be bullish on the stock--that is, any price rise will force short sellers to cover their short positions, making the stock's price rise even more.