Treasuries have been in a step decline for the past two weeks.This action has formed a flat bottomed triangle as they found support in the mid 114 area.Let’s look at the past couple day’s action, and take a peek at tomorrow.

First, I circled last Thursday’s bar.After making a new low for the break at 114-12, the 28th saw consolidation and an inside day, resulting in a breakout signal for the 29th. The 29th was a classic breakout bar, as bond futures opened on the low end of the range and closed on the high.This intraday directional move is what we look for on a breakout day.The rally on the 29th tested the down trendline; it also pushed momentum up to a short sale signal.  Friday was a good short sale day as bonds opened near the high and closed on the lows, testing the lows of the selloff.

Today’s trade showed consolidation.It had the narrowest range of the previous seven days, and traded within the recent range.These signals tell us to be looking for another breakout move tomorrow.With breakout setups you can’t know ahead of time which direction the breakout will take.Instead, I look for the market to take out close in support or resistance, and then extend the move in the direction of the early breakout.I use my Trade or Fade service to find these points (go here); you could also use chart points (like the recent lows) for potential breakout points.

Breakout day tomorrow!

Breakout day tomorrow! Looking at Treasury Bond Futures

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