Potential Topping Patterns in Treasury Yields
Few charts have mattered more to investors recently than the yield on the 10-year Treasury note. After a strong move to the upside, some contrary signals may be emerging.
The first pattern on today’s chart is the potential “hanging man” candlestick on October 19. It was followed by a lower close, and then a trio of bearish outside days. Such price action may be consistent with a reversal.
Second, MACD made a lower high in late October as yields inched higher. That kind of divergence (marked in yellow) can reflect exhaustion of a trend.
Third, the recent lower highs have produced a descending triangle. While this isn’t typically a reversal pattern, the tightening prices may indicate the uptrend has lost strength.
Next, TNX has come within roughly 20 basis points of the yield on the
US02Y two-year Treasury note. That level for the yield curve was the peak in September 2022 before it inverted under 100 basis points. Is it also holding the longer rate down?
Finally, we previously identified 5.25 percent as a potential upside level. However, TNX has approached 5 percent without being able to close above it. Some traders may view the “nice round number” as a logical place for the move to end.
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Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: https://www.tradestation.com/important-information.
The first pattern on today’s chart is the potential “hanging man” candlestick on October 19. It was followed by a lower close, and then a trio of bearish outside days. Such price action may be consistent with a reversal.
Second, MACD made a lower high in late October as yields inched higher. That kind of divergence (marked in yellow) can reflect exhaustion of a trend.
Third, the recent lower highs have produced a descending triangle. While this isn’t typically a reversal pattern, the tightening prices may indicate the uptrend has lost strength.
Next, TNX has come within roughly 20 basis points of the yield on the
US02Y two-year Treasury note. That level for the yield curve was the peak in September 2022 before it inverted under 100 basis points. Is it also holding the longer rate down?Finally, we previously identified 5.25 percent as a potential upside level. However, TNX has approached 5 percent without being able to close above it. Some traders may view the “nice round number” as a logical place for the move to end.
TradeStation has, for decades, advanced the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
Important Information
TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. TradeStation Crypto, Inc. offers to self-directed investors and traders cryptocurrency brokerage services. It is neither licensed with the SEC or the CFTC nor is it a Member of NFA. When applying for, or purchasing, accounts, subscriptions, products, and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means.
This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates.
Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: https://www.tradestation.com/important-information.
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