Fibonacci Treasury Bond

Fibonacci works on all actively traded instruments.

Here's a sell short setup in the US Treasury Bond signaled just a few days before the 2004 US presidential election.

The trading software automatically identified this opportunity on the 30 minute intraday chart. In this case, the “A” upswing is matched in price by the “C” upswing.

The low risk entry point is to sell short once the US4Z trades below the signal bar. The entry price would be one tick below the low of the signal bar (113.8125) at 113^26.

Before I show you the actual trade, let me show you the other piece of Fibonacci “evidence” for this setup.

The last price level shown on this chart occurs at the 62% retracement level of the most recent downswing.

Now we have indications from two different time frames.

Now here's what happened.

On Monday morning, the bonds gap down. Traders who sold short on the open would have a larger dollar risk per contract then expected.

I decided to place a limit order to sell short one December contract at 113^20. That happened around 9AM in the morning.

Once filled, I placed a protective buy stop at 114^00.

Fortunately it did not take long for the bond to trade lower. Once, the open profits were equal to the initial risk of 12 ticks ($375), the buy stop order moved to breakeven.

I ended up buying the contract back near the end of the next day at 113^04 for a cool 16 ticks ($500) in a little over a day.

Normally, I like to hold on to a profitable trade for as long as possible.

In this case, I really wasn't interested in having a position with the U.S. Election the very next day.

Here's what happened the next day:

That's right, the US4Z continued even lower. If I would have followed my typical trading rules, I would have been stopped out after the first half hour of trading for an even larger profit of 31 ticks ($968.75).