I'm showing the iShares Barclays 20+ Treasury ETF (TLT) at a very important crossroads. We've recently seen a beautiful rally off an old support decision in this ETF that came in at the $117.89-118.37 area. This lift off came as we started to see the stock indices falter after making some major Fibonacci price extension highs.
Now that I'm seeing the possible resumption of the stock index rallies, I'm currently watching the resistance in TLT for a possible failure and sell entry. This larger zone comes in at the $125.13-126.80 area. I can actually break it down into two resistance decisions. The first one comes in at the $125.13-65 area and includes a 50% retracement of one swing, a 786% retracement of another swing along with a 100% price projection of a prior rally swing of $7.20. The second zone comes in at $126.18-80 and it includes the 100% projection of the prior rally swing that lasted $8.13 along with a 0.618 retracement of a larger swing.
I will be watching this resistance in the coming sessions and if price continues to hold below here, I am going to watch the 30-minute chart to see if a short sale is triggered or not. If you look at the 30-minute chart below, you will see that this chart time frame is still on a Buy as the 8 ema is still clearly above the 34 ema. It is also holding above some key support that I have illustrated on the same chart at the $123.26-123.61 area. If we end up making a new high, I will have to recalculate the new support decisions to monitor for this timeframe.
If we do see a sell trigger and start to see a decline from the most recent high made at the $125.09, the downside potential comes in quite a ways below the market at the $116 handle. We don't always make our targets on these setups, but bottom line the potential risk/reward ratio is pretty dang good.
If TLT ends up clearing this same key resistance decision without any sell triggers, we have to consider that the rally will just continue on possibly to the key 1.272 target show above the market on the daily chart at the $136.07 area. Let's watch TLT and what it does around this key decision and then trade accordingly.
NOTE: For shorter-term traders, you may also choose to use a shorter-term trigger chart for daytrade entries. For example a 3- or 5-minute chart can be used, which will provide a quicker entry against the zone, but not one that should be taken overnight.
For more information on Trades and Triggers please refer here.