Working Money magazine. The investors' magazine.

Traders.com Advantage

HOT TOPICS LIST


INDICATORS LIST


LIST OF TOPICS





Article Archive | Search | Subscribe/Renew | Login | Free Trial | Forgot ID?

PRINT THIS ARTICLE

HEAD & SHOULDERS

Bond Yields Headed Lower

12/02/08 09:36:30 AM
by Arthur Hill

The 10-year Treasury note yield broke long-term support to confirm a bearish continuation pattern that points to sharply lower yields over the next few weeks and months.

Security:   $TNX
Position:   Sell

Figure 1 shows the 10-year Treasury note yield ($TNX) with a large head & shoulders pattern. With the prior move down, this pattern is viewed as a continuation. The long-term trend is visible on Figure 2. A continuation head & shoulders can be viewed as a big consolidation within an existing trend. The support break shows weakness and a continuation of that trend.

FIGURE 1: 10-YEAR TREASURY NOTE YIELD. Note the head & shoulders pattern. Combined with the prior move down, this pattern is viewed as a continuation.
Graphic provided by: MetaStock.
 
Based on traditional technical analysis, the downside projection is to the 23-24 area. This downside projection is based on the height of the pattern, which is around nine points. Neckline support resides around 33.5 (3.35%) and the head & shoulders high is around 42.5 (4.25%). The neckline break looks convincing and bond yields are headed lower.

Figure 2 shows a falling price channel over the last 18 months. Obviously, a falling price channel reflects a downtrend. The green support line is neckline support. The lower channel trendline is around 28 (2.8%) and this area could mark support. The red line shows the head & shoulders target in the 23-24 area (2.3-2.4%).

FIGURE 2: 10-YEAR TREASURY NOTE YIELD. The long-term trend is visible here, as well as a falling price channel over the last 18 months.
Graphic provided by: MetaStock.
 
Bonds move opposite of interest rates. Bonds rise when rates fall and bonds fall when rates rise. A long-term downtrend in rates implies a long-term uptrend in bonds. With a support break in the 10-year T-note yield, we can assume a resistance break in bonds, and bonds are long-term bullish.


Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
Company: TDTrader.com
Address: Willem Geetsstraat 17
Mechelen, B2800
Phone # for sales: 3215345465
Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

Traders' Resource Links
TDTrader.com has not added any product or service information to TRADERS' RESOURCE.

Click here for more information about our publications!


Comments or Questions? Article Usefulness
5 (most useful)
4
3
2
1 (least useful)

Comments

Date: 12/03/08Rank: 4Comment: 
Date: 12/16/08Rank: 5Comment: 
PRINT THIS ARTICLE






S&C Subscription/Renewal




Request Information From Our Sponsors 

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

PTSK — The Professional Traders' Starter Kit
Home — S&C Magazine | Working Money Magazine | Traders.com Advantage | Online Store | Traders’ Resource
Add a Product to Traders’ Resource | Message Boards | Subscribe/Renew | Free Trial Issue | Article Code | Search

Copyright © 1982–2024 Technical Analysis, Inc. All rights reserved. Read our disclaimer & privacy statement.