A decrease in open interest accompanied by a price increase indicates that the bears have conceded. The recent price rise is due to short covering. The upward momentum generally comes from two sources: bullish entries and short covering.
When a price increase occurs due to short covering, we need to be cautious about going long. Although the bears are actively covering their positions, they are relatively rational. There is no panic selling; instead, they seek to exit at favorable prices, resulting in a gradual price increase.
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A price increase solely due to short covering is not sufficient to support a sustained rise in prices. The future market will depend on whether the bulls can actively enter. If the bulls are able to actively enter, the probability of a sustained price increase in the future is relatively high. Price increases resulting from a decrease in trading volume and open interest require cautious long positions.