Are US Bonds on the Verge of a Double Top?

Ilan Levy-Mayer |

When one looks at weekly and monthly charts, it quickly becomes clear that bonds have been in a major uptrend. Going back over the last 14 months or so, most traders who have tried shorting the US treasury bonds (known as the 30 year bonds) got burned.

US bonds have an inverse relationship to interest rates, and as we all know, interest rates are at historic lows, while US bonds are at historic highs. More about the mechanics of this futures contract is available here.



A Potential Double Top on the Horizon

For those of you who read a few my market analytics posted here, you will know by now that I am more of a short term to medium term trader. I look for swing trades lasting from days to maybe weeks, and only rarely over months. This set up is no different. Looking at a daily chart below, I see potential for a double top confirmed with a 5th wave Elliott Wave.

I am looking for a confirmation if prices can break below 163.16 that in return will provide me with initial targets of 162.07 and 159.14, respectively. Tomorrow (Wednesday 8th 2015), FOMC minutes are due. This report may be the catalyst for either another leg up or the start of a short term correction. My speculation for a trade idea is to sell bonds close as possible to 166.00 with a stop above recent highs OR sell bonds on a break below 163.16.

T-Bonds Daily continuation chart ( Heikin-Ashi)

T_Bond_Chart.jpg

 

Many ways to trade any market, many ways to lose money in any market and only very few ways to lock in gains - this one is not different. If you need help creating a trading plan, visit our broker assist services.

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