The 30 year bonds are in a strong rally, and over the next several days, the stop will be moving up dramatically. The 10 day low will move up from 130-18 to 134-02.
For a short term trend following system, this is big money at $2,500 per contract. Not bad for a trade that’s just a few weeks old.
If there is a breakout of the upper range at 139-27 (!) , who knows where this thing might go. We don’t have much information up here in the charts.
We can look at yields. The yield of a bond is how much it pays in interest. As the price goes up, the yield goes down. So, we would expect to see a huge drop in yields over the last few months as this bond rally took off.
That’s exactly what happened. While we do not have much useful information about the futures contracts, we can see more on the yield chart.
Looking at the yields from the last few years, we might get an idea of where highs are in price.
It turns out we’re right up against a hugely important level in the 30 year. The low yields of 2010 were 3.46% and the current low is 3.50%.
That’s why the bond rally stalled in the last few days – the yields were right on top of major lows! A break of this level – the current highs in prices or lows in yields -could mean a huge increase in the profitability of this position.
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Michael Sankowski spends a lot of his time applying quantitative mathematics to financial markets. When he's not playing the guitar, he has been a professional trader for 20 years. He's traded billions of dollars on four continents and is a well-known financial writer. He's a CFA, CAIA, and has created patented Futures products. He's here to help you make more money (and especially not lose your money).
