Thursday, December 16, 2010

TheTechnicalTake: TBT

I have been highlighting higher Treasury yields since October 15 (well before the heard), and I also mentioned on December 8 that the move higher in Treasury yields would "pick up steam".  But every price move has its limits, and the Ultra Short Lehman 20+ Year Treasury (symbol: TBT) is no different.

Figure 1 is a daily chart of the TBT.  Prices are at the upper end of a well defined trend channel, and they are hitting key pivot point resistance levels at 40.79.  I would expect some consolidation at this area before prices move higher.

Figure 1. TBT/ daily

Why do I think yields continue higher?  This can be seen in figure 2 another daily chart of the TBT.  The inverted head and shoulders bottom is nicely seen, and the resolution of this pattern should result in a price move of approximately 7 TBT points above the neckline of the price pattern. 

Figure 2. TBT/ daily 

The measured move of 7 points plus the neckline value of 37 suggests that TBT should get to 44.  This is consistent with weekly resistance levels, which are shown in figure 3. 

Figure 3. TBT/ weekly

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