The iShares 20+ year Treasury Bond exchange-traded fund (TLT) is a liquid ETF, where one can take a view on the direction of interest rates and also know something about the volume flows that one might only see if they worked for a primary dealer.
Let's check out a few charts.
In this daily bar chart of the TLT, below, we can see that prices made a six-month distribution pattern from July to the end of December. Prices have broken out to the down below the October low. TLT is trading below the 50-day and the 200-day moving averages. The 50-day line is ready to break below the 200-day line for a bearish dead or death cross sell signal. The On-Balance-Volume (OBV) line has been weak since September.
The Moving Average Convergence Divergence (MACD) oscillator is bearish.
In this weekly Japanese candlestick chart of TLT, below, we see a bearish setup. We can see red or bearish candles but no lower shadows suggesting that the lows are being rejected. Prices are trading below the declining 40-week moving average line which is just now turning lower. The weekly OBV line is pointed down and the MACD oscillator is below the zero line. A weekly close below $135 is an important sell signal.
In this daily Point and Figure chart of TLT, below, we can see a potential downside price target in the $119 area.
In this weekly Point and Figure chart of TLT, below, we used a five box reversal filter. Here the chart reveals a longer-term target in the $96 area.
Bottom line strategy: Regular readers of Real Money should know by now that in nearly seven years of writing for RM that I have never recommended a short position nor inverse ETFs. Today is no different but traders should expect that interest rates could move significantly higher this year.
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