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Contrarian Indicator

A signal interpreted opposite to its face-value reading — extreme sentiment (very bullish or very bearish) is treated as a possible sign of an impending reversal.

A contrarian indicator is read opposite to its face-value interpretation — the logic being that when sentiment becomes extreme in one direction (excessively bullish or bearish), there may be limited “new” conviction left to push further, raising the odds of a reversal. Put-Call Ratio is a classic example, often read this way at extreme readings.

See how PCR is used as a contrarian indicator in Put-Call Ratio (PCR) Explained: What It Means and How to Use It.