Back in August, 3D Systems (NYSE:DDD) was one of the most heavily shorted stocks on the market, with about 26% of its shares outstanding being shorted. Since then, shares of the 3-D printing giant's short interest has declined by 42% ­-- or to about 16% of shares outstanding. In other words, investor sentiment toward 3D Systems has been improving, which has helped shares double in value since August.

If too many investors are bullish or bearish on a stock, and sentiment reaches extreme levels, it could mean a reversal in sentiment is nearby, and stock prices could follow suit. At the end of the day, tracking short interest can help investors determine overall sentiment, and whether investors are being too extreme. In the following video, 3-D printing analyst Steve Heller discusses the decline in 3D Systems' short interest, and what it could mean for the stock going forward.

Fool contributor Steve Heller owns shares of 3D Systems. The Motley Fool recommends 3D Systems. The Motley Fool owns shares of 3D Systems and has the following options: short January 2014 $20 puts on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.