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Triangular Consolidation Bullish for Bonds: Technical Analysis

A so-called triangular consolidation trading pattern on 10-year Treasury note futures suggests a bullish breakout for the contract that would equal the high reached in July, according to Bank of America Corp.

“While bearish momentum divergences should be a concern for longer term bulls, the increasingly triangular consolidation points to a bullish break,” MacNeil Curry, chief rates and currencies technical strategist at Bank of America Merrill Lynch in New York, wrote today in a client note.

The December 10-year futures contract touched a high of 134 18/32 on July 25. It climbed today to 134 5/32. The note is “carving out a four-day symmetrical triangle, which points to a push” to the higher level, Curry wrote.

“From a 10-year cash perspective, this targets the pivotal 1.554 percent - 1.54 percent zone,” Curry wrote, adding “into here we would be on the lookout for greater signs of stalling.”

A break of 1.667 percent or a price of 133 11/32 would confirm a bearish turn in trend, he added.

Curry did not immediately return calls seeking comment.

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

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