Japan Yields May Rise to 1.2% on Candlestick: Technical Analysis

Yields on Japan’s 10-year government bonds may climb to 1.2 percent, the highest since May, as a candlestick chart signals a switch to a rising trend, according to MassMutual Life Insurance Co.

On the candlestick chart for last month, 10-year yields closed at 1.045 percent on Oct. 31, above the opening level of 1.025 percent on Oct. 3, according to Satoshi Shimamura, head of rates and markets at the investment-strategy department of MassMutual Life in Tokyo. The candlestick turned “white” for the first time in eight months, he said.

Candlestick charts show opening and closing prices within each trading period. If the closing price is above the open, the candlestick is open, or white, but if the close is below the open, the candlestick is black.

“Yields may reverse to an upward direction in November,” Shimamura said. “Rates will climb to as high as 1.2 percent, a 61.8 percent retracement of a drop from the recent peak of 1.35 percent to the recent bottom of 0.965 percent,” citing a series of numbers known as the Fibonacci sequence.

Ten-year yields reached 1.35 percent on Feb. 9, the highest this year, before declining to 0.965 percent on Sept. 22 and Oct. 6, the lowest since November 2010, forming a so-called double bottom. Rates have since climbed, reaching 1.045 percent on Oct. 31, the highest in almost two months.

Fibonacci analysis is based on a theory that prices rise or fall by certain percentages after reaching a high or low. Key percentages include 23.6, 38.2, 50, 61.8 and 76.4.

In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.

To contact the reporter on this story: Yumi Ikeda in Tokyo at yikeda4@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at Rswift5@bloomberg.net.

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