Treasury Five-Year Futures May Extend Record: Technical Analysis

Treasury five-year futures are poised to extend gains to a new record after breaking through a level of so-called resistance, Credit Suisse Group AG said, citing trading patterns.

The advance of the securities past their June 1 high of 124 5/8 yesterday “signals bullish continuation,” according to analysts including David Sneddon, head of technical-analysis research in London. The contract is set to advance toward another resistance level at 125 1/8 before climbing to 125 23/32, the analysts said, citing Fibonacci theory.

“The five-year note has started the week on the front foot,” the analysts wrote today in a note to clients.

The five-year contract for September delivery was little changed at 124 21/32 at 6:43 a.m. in New York. The security climbed to a record 124 3/4 yesterday.

Investors should buy the five-year contract at 124 1/2 and sell once it has risen to 125 3/32, the analysts wrote. They should exit the trade should the contract decline to 124 10/32, they said.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Resistance refers to an area where sell orders may be grouped.

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: Emma Charlton in London at echarlton1@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net