'Large holders closing short positions' impact on the market:
1. Mechanism level
Closing a short position = buying action
In the futures market, if large holders hold a significant amount of short positions, when they want to close them, they must 'buy' the corresponding quantity to close their positions.
This 'buying' action essentially creates buying pressure, which has the opportunity to push prices up.
2. Will it lead to a rebound?
Consider the context:
If market liquidity is insufficient:
Large holders closing a substantial amount of short positions at once will directly consume sell orders on the order book, causing prices to rise rapidly and create a short-term rebound.
If market liquidity is sufficient:
Large holders may close positions in batches, having a relatively small impact, with limited price fluctuations, and may not necessarily result in a significant rebound.
If other traders follow:
When large holders' closing positions are noticed, the market may experience a 'short squeeze', prompting more short positions to hurriedly cut losses and buy back, which will amplify the rebound.
3. Points for traders to pay attention to
The magnitude of the rebound does not necessarily equal a trend reversal: Many times it is just a short-term 'squeeze effect'.
Observe trading volume: If the rebound is accompanied by increased volume, it may be a signal of a trend reversal; but if the volume decreases, it is often just a technical correction.
Position is important: If large holders close short positions at key support levels, the strength of the rebound is often more pronounced.
✅ Summary:
Large holders closing short positions can indeed trigger a rebound, especially in situations of insufficient market depth or accompanied by a short squeeze. However, whether it can evolve into a trend reversal still depends on trading volume, technical position, and overall market sentiment.