Is it time to start looking at the iShares 20+ Year Treasury Bond exchange-traded fund ( TLT) ?
I am in no way a bond guy, a yield guy, or focusing on the news surrounding municipals. There are much smarter people in that arena I turn to. I'm looking at you Tom Graff. Seriously, read his stuff. If you're not reading it, fix that.
News aside, I can't look away from this chart. The setup on the weekly TLT is a thing of beauty. Clean breakout potential. Solid indicators. Great price action. Consolidation. Clear stop. No chart is perfect, but this one checks a lot of boxes.
A close this week over $150 might be enough for some traders. Personally, I want to see $151 or maybe $151.50. I do believe a move over $152.50 will be the real catalyst. TLT isn't something that's going to offer ridiculous upside, but a $5 to $7.50 move to the upside seems doable here. This has a liquid options market and even the Nov. 19 at-the-money call options could double on a move from $151.50 to $157.50.
In terms of a stop, any close below $147.50 would take me away from TLT. We break that level and the next $10 move is likely lower vs. higher. Traders wanting to buy the stock, the risk appears to be around $4 to the downside for $6 to $9 on the upside. That's not a bad risk vs. reward scenario. Although this can gap and move, we are talking about long bonds here so outside of black swan moves traders should be able to honor stops or targets without fear of a huge gap.
It was nice to see some strength in equities, but don't believe those saying we're out of the woods already. Both the Nasdaq 100 ( QQQ) and iShares Russell 2000 ( IWM) closed the day at their 50-day simple moving average (SMA). This remains resistance. Closing at the level after trading above it intraday reinforces it as resistance. My guess is we are going to trade around this SMA for a few days before making our next move. No, I don't know what that move is yet. No one does. We all have our guesses, but seeing how we trade the next two days should help us make a more educated guess as to where the market heads over the next few weeks.
