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Get ready for another oil drop…
Bloomberg reports an all-time record “short squeeze” rocketed oil prices 50% higher over the last seven weeks… not traditional bullish bets.
[A “short squeeze” happens when rising prices force bearish traders to liquidate their short positions. In a short position, a trader has borrowed and then sold a security… so they must later buy to close out their trades. This short-covering buying pressure “squeezes” prices higher.]
The Commodity Futures Trading Commission (CFTC) reports traders closed 131,617 short positions since February 2. That’s the largest liquidation they have on record.
Even more telling: Bullish bets on oil also declined by 971 positions as prices skyrocketed over the same time. No bullish supply and demand fundamentals drove this rally.
Bottom line: Oil’s recent price rise is not indicative of a “healthy” market… and is ripe for a reversal. Aggressive traders may want to take a short position in oil from these levels.
Remember, this is a speculative position. Follow PBRG’s risk-management protocol before considering such a trade.