Shooting Star Rebuffs U.S. Bond Drop: Technical Analysis

A “shooting star” formation on a candlestick chart suggests Treasury 30-year bonds will continue to rally even after a three-week slide, according to CRT Capital Group LLC.

“The pattern are a solid rejection of the bearish sentiment,” David Ader, head of U.S. government-bond strategy at CRT in Stamford, Connecticut, said in a telephone interview. “We made a new high in yield, and subsequent to that we failed to breach that new high, closing lower, which represents a rejection of how far we rose in yield.”

Candlestick charts show an index or a security’s high, low, open and close each day. A shooting star formation emerges when securities that have been rising register an open, daily low, and close far from the session’s high.

The 30-year Treasury bond yield fell three basis points, or 0.03 percentage point to 2.72 percent at 1:11 p.m. New York time, according to Bloomberg Bond Trader data. The 2.75 percent security due August 2042 rose 21/32 or $6.56 per $1,000 face value to 100 20/32.

The bond yield’s inability to rise above 2.77 percent suggests the selling momentum has run out of steam, according to Ader. A breach of 2.6 percent would signal further rallying, while a rise above 2.82 percent, would signal further weakness, Ader said.

Thirty-year bonds have returned 5.3 percent this year, more than doubling the 2.08 percent gain in the broader Treasury market, according to Bank of America Merrill Lynch indexes.

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

To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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