Bonds have been one of the most reliable—and confounding—trades of the year, with the yield on the 10-year falling from 2.20 percent to below 1.90 percent in 2015. And based on one trader's chart work, the move, combined with seasonal trends in the market, could set the stage for a "vicious" rally.
Todd Gordon, founder of TradingAnalysis.com, said the volatility that typically surrounds earnings could have some investors running for the safety of Treasurys and force a breakout in bond prices. (Bond yields move inversely to prices.) To profit from the potential move, Gordon looked to the TLT, the ETF that tracks U.S. Treasury yields, as a way to seek profits.
"To set up the trade you'll notice a pretty significant decline here [in the TLT] from the February high," said Gordon on Wednesday's "Trading Nation." The TLT has fallen 6 percent from its all-time high of $138.50 set on Jan. 30. "Then we saw a bounce in late February and another decline in March."