If you've been on board the move in
(USH3:CBOT) during their
exhibition of pent-up momentum, you may be wondering how high these debt futures are likely to climb.
T-bonds have been performing well since breaking out of an ascending triangle formation four days ago. That implies they'll make good on a measured move.
Notice how they've either gapped or lapped higher every day since the Feb. 25 breakout and then went on to log higher closes at contract records. This price action confirms the breakout and provides evidence that T-bonds have sufficient momentum to fulfill the measured move.
Calculating a measured move price target out of ascending triangles is easy. Take the widest part of the triangle's base (points A-B). Extend that distance from the breakout, points B-C, on the following chart. That's the distance a market is calculated to travel from the breakout point in fulfilling the measured move.
Given the big-picture ascending triangle formation, the measured move price target in T-bonds is point C on the following chart, or 120 28/32.
(USM3:CBOT), the contract for which the fulfillment of the price target is more likely to play out because of its longer duration, the measured move target is 119 21/32.
A more conservative approach for determining the price target takes a smaller portion of the ascending triangle formation, calculating the measured move from the Dec. 31 high. Using the shorter time frame provides a price target of 118 13/32 for the March contract and 117 24/32 for June T-bonds.
The momentum-fueled March
(CDH3:CME) skated out of a pullback-from-a-high setup Friday and are holding on to gains Monday, just one day before the Bank of Canada's monetary policy announcement. Consumer inflation came in unexpectedly high last week, accelerating to a 4.5% annual rate and increasing the odds the BOC will hike rates Tuesday.
A growing interest rate differential with the U.S. makes the Canadian dollar more attractive. Canada's economy, the best performer in the Group of Seven industrialized nations, is also a plus for the currency.
(JYH3:CME) outside bar down at a six-month high suggests that repatriation buying of the yen could be capped. The yen gets a seasonal boost almost every March when firms bring home yen to window-dress their fiscal year-end financial results.
The Bank of Japan has also been active in attempting to keep a lid on the yen's appreciation, selling billions for dollars and euros in an effort to keep export prices low. Friday's gap down works to confirm the outside reversal bar.
Still, the yen has also benefited from flight-to-safety buying, despite the moribund economy and record (for Japan) unemployment. This means that trades above 0.8550 invalidate the reversal.
Softs and Pullbacks
Last week I pointed out that both sugar and cocoa had taken a dip from their recent highs. Even so, sugar hadn't broken its bullish symmetry, but cocoa did overbalance and break, violating its uptrend. Notice how May
(SBK3:NYBOT) triggered in a range-extending bar out of a pullback-from-high setup on Friday, implying the uptrend is still intact.
Going the other way, May
(CCK3NYBOT) is triggering out of pullup-from-a-low pattern Monday, reconfirming the break of bullish symmetry and confirming the downtrend.
Marc Dupee is an independent trader and co-author of the book
The Best: Conversations With Top Traders. Dupee was formerly markets analyst and futures editor for TradingMarkets Financial Group. At time of publication, he held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he invites you to send your feedback to
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