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'Head & shoulders' chart signals rates to fall

Traders in the 10-year bond options pit at the Chicago Board of Trade signal orders.
Frank Polich | Reuters
Traders in the 10-year bond options pit at the Chicago Board of Trade signal orders.

Technicians have been calling for a near-term top in Treasury yields, and now some see a chart pattern that shows rates could go down as easily as they went up.

On Tuesday, a "head and shoulder" formation was developing in the 10-year yield. That pattern could spell a reversal, and a decline in yields.

Read MoreWhy Treasury yields could be topping

The pattern, which shows the left shoulder at a yield of just above 2.3 percent and the top of the head at 2.36, has now formed a second shoulder at just about 2.3 percent.

The chart shows capitulation at the 2.36 percent level, according to David Ader, chief Treasury strategist at CRT Capital.

"It proved an important level. We held it once. It was this sort of (a) capitulation move and then retested the shoulder which we're doing today. The implication is you've exhausted the selling," said Ader.

Treasury yields were higher Tuesday, after a better than expected rise in housing starts and building permits. They were also boosted by heavy issuance in the corporate bond market.