For theory see here or here, where they refer to it as a 'rising wedge'. For practice, let's look at the chart for the June US T-Bond (15 minute ticks) as at a few minutes ago (click to enlarge):
If technical analysis is correct, the likelihood is that the price will fall by at least a point (i.e. down to 124-ish) over the next few hours. We'll see.
Tuesday 10 March 2009
Technical analysis for beginners: The Pennant
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7 comments:
"If technical analysis is correct,..": yeah, like Intelligent Design. My eye.
MW/dearieme
Technical analysis maybe total hogwash BUT if a significant part of the market are technical analysts then they will trade (and therefore affect the market) as if technical analysis was correct. Therefore, on the assumption that technical analysis has a significant effect, it pays to analyse stocks "technically". For similar reasons, if you're dealing with someone who believes in astrology - hogwash though it is - it would be foolish not to treat astrology seriously.
At school I learned early on(please feel free to construct) to put my hand in the air when I did not understand something. I have no idea what T-bonds are, mean or merit.
My hand is up, pleading.
Will one of you please explain the relevance and importance of these vehicles to this uninitiated.
Thank you.
STB.
p.s. The usual proviso: I know how to google but cannot be bothered doing the whole learning curve thing when learned folk can summarise succinctly.
Ta.
It's short for "US Treasury Bond" (like 'gilts' in the UK or 'Bunds' in Germany).
The future in question is the averaged-out expected theoretical value of a T-Bond with thirty years to maturity paying six per cent interest as at the delivery date (in this case, sometime in June). If interest rates go up, the value (and hence the futures price) goes down and vice versa.
... to round that off, '125' means that $100,000* nominal would sell for $125,000 - i.e. interest rates are currently a lot less than six per cent, so the value is much higher than par/nominal.
* $100,000 being the contract size of the future, i.e. one 'lot'.
Nils Bohr, on having a lucky horseshoe over his door: "I'm told that they work even if you don't believe in them."
Thanks.
STB.
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