How To Profit From the Current Volatility In Bonds With Hawkeye

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How To Profit From the Current Volatility In Bonds With Hawkeye

Have you noticed the volatility in the bond markets lately? Because of the economic news coming out of the US, China, Europe, and especially Greece, there are some great trading opportunities for traders, and especially Hawkeye traders! So, in this week’s article, we will take a closer look at the 30 year U.S. bonds in line with our style of trading.

Let’s begin with the daily chart. First off, I want you to notice the green volume that’s coming into the market (as circled).

Bond Daily Chart

Although the Heat Map is currently red, we see a combination of both green volume and a Hawkeye Pivot (as marked by the yellow dot and cyan arrow). When we see a Pivot like this, we often get a 3, 5, or 7 bar reversal to the upside. So, if you wanted to try a long in this down trend, you certainly could. But remember, since the overall market bias is down, taking a long at this point would not be considered a trend-following trade, but only a quick-profit target trade.

With this in mind, let’s continue with the 5 minute chart.

Bond 5-Minute Chart

The first thing I want you to notice is the red vertical line near the left of the chart, which shows when the S&P session starts. Although the bonds open before the S&P, I like to see how they react to the S&P open before I take any trade. So, since there is green volume and a Pivot (as marked by the yellow dot), if a long comes in, we could take it.

However, since the overall weekly trend is heading downwards, we need to remember a long trade would be against the trend. So, if you decided to take a long, make sure you keep a well-defined profit target, because you should expect the possibility of a quick turn around with prices heading back down. And that’s exactly what happened (as marked by the red arrow). That’s why taking the short, in sync with the weekly downtrend, would be a safer approach.

And as we can see, it provided a great trend-following trade that we could ride all the way down with a variety of methods to manage and exit the trade. One good option would be to exit after the wide bar that comes in at the bottom (indicated in red), because we know from the Hawkeye wide bar rule that the odds of the next bar closing within the range of the wide bar is about 80%. So certainly, that would be a fine place to get out.

Given all the current volatility in this market, I encourage you to take a close look at trading the 5, 10, or 30 year bonds.

I suspect there will continue to be a lot of great trading opportunities in these markets over the next few months.

So, if you want to take advantage of this great trading, and don’t already have our Volume Starter Package, click here

And if you already have the Volume Starter Package and want to step up to the next level, click here

Good trading!

Nigel

We demonstrate this and many other methods in our live demonstration room held every Wednesday, and this is open to everyone. Click this link for more information or to join us in class.

Please contact us at [email protected] for any questions you might have about using Hawkeye Indicators in your trading!

[The red and cyan arrows are for illustration only and do not form part of the software]