In mid-October on TraderPlanet, I wrote about the bullish case for Treasury futures. I’m revisiting that thesis to argue it’s time for bulls to think about an exit strategy.
The first thing to be aware of is the proximity of the 30-year Treasury yield to chart support at 2.452% (the weekly chart reads 24.52). This is an excellent guide since there isn’t any technical resistance overhead for Treasury bond futures.
Don’t think of 2.452% as a floor that will point to substantially more downside if breached. Given the powerful bearish momentum, there’s a good chance support will fail. But that’s when you’d want to start securing at least a partial profit on any long positions in the long bond.
Note the deep oversold condition illustrated in the fast RSI average at the bottom of the weekly chart of the yield.
This increases the odds of at least a temporary move sideways or higher sometime soon. So, if a breach of 2.452% were to draw in more buying among the retail crowd, you’d want to take advantage of that move to take profits, as any further upside in price probably wouldn’t be sustainable for very long. You could then step aside and observe.
If the yield offered another leg down to lower levels, you could unload the rest of your position. Conversely, if the yield began basing, you could exit the trade before an upside trend reversal got underway.
Good trading, everyone.
