COVID-19 Revives Ultra-Safe European Bonds
Technical Analysis Trading Psychology Trading Tips

T-Bond futures target hit for maximum profit and how to read capitulation candles

  • Successful Short Trade: A short trade initiated on May 2nd has reached the maximum target, driven by a simple strategy of resistance zone rejection.
  • Capitulation Wick Insight: The presence of a capitulation wick on the ZB daily chart indicates a market bottom, contrary to the misconception of increased volume leading to more selling pressure.
  • T-Bond Futures Analysis: T-bond futures are experiencing a strong rally, with an ascending triangle formation and price finding support on the diagonal line. Waiting for a slight retracement before entry is advised to avoid chasing the market.

Recap from last weeks trade

On May 2nd, we looked at taking a short trade that has now hit the maximum target. It was a very simple position where we took a short as the market refused to push through a resistance zone. Trading can be very simple if we use the correct mindset, manage our emotions, and don’t apply too much importance to the outcome.

ZB Daily Chart

Look at the chart above. There is a capitulation wick which is generally a good sign that the market has bottomed. Most traders would be under the assumption that this increase in volume would lead to a further sell-off, but that is because they don’t understand how to read volume correctly in markets.

Capitulation candles come at the point of max pain or selling pressure. Big players, or as Wyckoff would call it, ‘the composite man’ would then begin buying up the security with confidence that they have the ability to swing the market in their favor or hold a support level with ease.

We then see the market reverse just as ZB has begun doing.

Moving forward

Looking at the T-bond futures chart, prices are rallying sharply once more. There is an ascending triangle forming on the daily chart, and price is finding support off the diagonal line. It will be ideal if we see a small retracement down toward 126’24 for us to enter because it is never a good idea to chase the market.