UBS Says Italian Bond Futures Are a Buy: Technical Analysis

Italian 10-year bond futures are set to extend gains after closing above a key level of so-called resistance, UBS AG (UBSN) said, citing trading patterns.

The contract expiring in March 2013 closed 0.2 percent higher at 109.93 yesterday. That’s above the 62 percent retracement of the December sell-off, the bank said, referring to Fibonacci analysis. It fell from 111.42 on Dec. 3 to 107.11 on Dec. 10, according to data compiled by Bloomberg.

We are “looking for continued upside to break above the 111.50 December high and onto the 114.73 extension level,” Richard Adcock, a fixed-income technical strategist in London, wrote in an e-mailed note today.

The 10-year contract rose for a sixth day, climbing 0.8 percent to 110.75 at 2 p.m. London time. Investors should sell to limit losses if it declines to 108.50, the bank 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 technical analysts anticipate sell orders to be clustered.

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

To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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