The last time we talked about the Bund was on the 8th of April. At that time we said that the Bulls needed to step up to the plate if we took a look down at 114.73. Well this did in fact happen and the Bulls did react but only after allowing a print at 114.67. The subsequent bounce was quite impressive but once again we ran into trouble just above 116.00. Ignoring the abnormal spike down on the 28th of March, the 38.2 Fibonacci Retracement of the move down from the 17th of that month comes in at 116.13 which is bang on the high of the bounce posted on Monday.
Indicators in Play
Fibonacci introduced his sequence of numbers to mathematics back in the 1200’s. These numbers appear in all walks of life but have an eerie influence on trading. We use the 38.2 level as an indication of the strength of the correction or indeed if the longer-term trend has changed contact.
Sometimes we forget that there are three trends in markets. The up trend, the downtrend and the sideways trend. The latter is where we should employ range-trading
techniques.
Summary
We are stuck in a range now from 114.67-73 to 116.13. As long as sensible stops are employed this looks to be the correct play. However, from our perspective, selling strength is the preferred trade and only a close above 116.13 would change this. Lets not forget though, there is still plenty of important data this week with the potential to get things moving.
David has been
analyzing and trading the worlds financial markets for the past 25 years. After an initial grounding with Mercury Asset Management and Warburg Securities he went on to set up his own brokerage operation in London. Since then he has appeared regularly on Bloomberg Television and been involved in providing analytics on behalf of some of the worlds major exchanges. He is also a member of the Society of Technical Analysts.
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