TLT Arcs Down into Support

Oct 19, 2010: 12:16 AM CST

Will the popular bond fund TLT – longer-term Treasury Bond – hold support at the current level… or break down to the next level of expected support?

That is the major question.  Let’s take a look at the intraday arc pattern formation (one of my favorites) and then see the higher timeframe daily chart support at the $100 per share level.

First, the broader Daily Chart support:

The key here for the next move is going to be what happens at the $100 per share level.

That’s because – simply – $100 is a ’round number’ psychological support level that also happens to coincide with the 38.2% Fibonacci retracement as drawn from the prior 2010 lows.

The level also holds nominal price support from prior resistance during the July/August period.

In Elliott Wave terms, we certainly could conceive of a “C” wave (which is likely where the count would be now) continuing down to the 50% retracement just under the $98 level, which would also make this sort of a Bear Flag move on the chart.

Volume has increased to the downside – selling volume – during the recent down-swing.  That’s certainly not bullish at the moment.

The 3/10 Momentum Oscillator also just touched a new chart low, which is a sign of increasing bearish momentum.

So price has a lot to overcome to support at the $100 level.

Let’s now drop to the 60-min chart to see the neat little arc formation and how it is playing out:

You might want to call this a trendline break pattern as price broke the rising intraday trendline recently at the $104.50 level on October 11th, but the broader picture shows an arc-pattern formation that is taking place as well.

Traders often call these “Mirror Images” or “Rounded Reversals” and they imply that price will test – hit – the lower portion of where the arc pattern started.

That’s already happened, as we are now under the level seen in mid-September at the $100.50 level.

Price now is trying to mount a rally off the confluence support – seen above – at the $100 level.  That will be key to watch in the days ahead.

Corey Rosenbloom, CMT
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4 Responses to “TLT Arcs Down into Support”

  1. CumbucoTrader Says:

    posted my thoughts on USDX, and the China rate hike. This doesn't seem like a great place to be long equities:

    also charts of GBP/USD GBP/CHF EUR/CHF CAD/CHF

    also went long FXP today with a tight stop. Short-term trade on China rate decision.

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