Short Squeeze in Crude Oil could lead a reboundAfter bullish momentum yesterday and rupture of the USD29,80 resistance, oil has room for a rebound to the USD35 and USD38 leves.
There is a buy signal in the RSI and will be soon at the MACD, the latter presents divergence with the price. These three indicators increase the likelihood of upward movement. The expectation of falling prices to USD20 has possibly increased short positions, which would feed long positions.
From fundamental perspective, low prices would not be sustainable in the medium and long term, because Middle Eastern governments need to finance their spending. Long-term investors know that these prices represent a good buying level.
The rebound could be extended in the short term to moving average area of 20 to 40 periods and the downward trendline. The rebound fail if the USD29.80 support breaks.
