A Breakdown and Level Planning for Bond Fund TLT

Jun 3, 2015: 9:37 AM CST

Bond prices are breaking down sharply this morning as yields spike.

Let’s chart this logical movement, note key levels on which to focus, and add some context to today’s move.

We’ll start with the Daily Chart of popular bond fund TLT:

First, the TLT Exchange Traded Fund represents the longer-term US Treasury Bond Fund from iShares.

A similar companion fund would be IEF, the 7 to 10 year Treasury Fund (ETF) also from iShares.

Bond (Treasury) Prices move in opposite direction to Bond Yields, so when you see a downtrend in prices, you’re also seeing an uptrend in yield.

In terms of the tradable ETF – TLT – price peaked near $137.00 per share in January only to see a three-wave (so far) pullback (down to March, up to April, down to present) to the current $118.00 per share level.

The most recent key price pivot was the $122.50 level which I highlighted with a blue line (and red arrows).

Price fell sharply from this logical barrier level over the last three sessions which brings us to the current $118.00 low.

The $118.00 level is simply the prior price low from May 2015 and it’s our focal point today.

Shares are currently testing (touching) this level on higher volume, and when we combine that with the April-to-May sell-off, we’re seeing a picture of likely Distribution (lower prices on higher volume).

This suggests additional selling pressure could be likely.

The Daily Chart Frame doesn’t dip beneath $117, so let’s turn to the Weekly Chart for targets:

2014 was a wonderful year for Treasury Prices, as buyers reversed a downtrend at the $102.00 per share level into the 2015 peak at $138.00 (a 35% strong rally).

Now, we’re seeing a reversal and sell-swing (downtrend) lower away from this level toward support.

Price initially pivoted off the $120 level but again fell lower this week from the $122.50 pivot.

For now, we’re focusing on the following weekly levels as possible sell-swing targets:

  • $117.00 (the 200 week Simple Moving Average)
  • $115.00 (the 61.8% Fibonacci Retracement as drawn)

I also highlighted the big spikes in sell (distribution) volume in 2015.

Monitor current price into these targets if a continued sell-pathway opens under the current $118 level.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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