Wednesday’s ETF Chart To Watch: Barclays 20 Year Treasury Bond Fund (TLT)

by on August 22, 2012 | ETFs Mentioned:

Major equity indexes popped higher at the open setting new highs for the year, only to give into lunchtime profit-taking pressures and trade lower into red territory for the rest of the day. Apple made headline news today as the stock extended its gains, hitting an all-time high at $674.88 a share, but was quick to give into profit-taking pressures, which dragged it lower by nearly 1.5% on the day. Domestic benchmarks likely retreated from historical resistance levels in anticipation of today’s FOMC minutes, which should offer insights and valuable economic commentary [see also The Ultimate Guide To Non-Fiat Money].

As such, the iShares Barclays 20 Year Treasury Bond Fund (TLT, B+) is our ETF to watch for the day as it may experience volatile trading after markets digest the latest economic outlook from the FOMC minutes. The Fed report will offer insights as to how board members voted in the last FOMC meeting during which Chairman Bernanke emphasized his reluctance to offer additional stimulus unless deemed absolutely necessary [see also Better-Than-AGG Total Bond Market ETFdb Portfolio].

Chart Analysis

TLT appears to have endured a healthy correction since hitting an all-time high at $132.22 a share on July 25, 2012. Since then, profit-taking pressures have managed to knock this ETF down to its 200-day moving average (yellow line) right around $120 a share. TLT appears to be holding support at this level, which presents an attractive opportunity seeing as this ETF has a history of bouncing off its 200-day moving average; notice how in mid-March of 2012 TLT managed to bounce off its 200-day moving average and resume its longer-term uptrend up to its most recent peak [see also 17 ETFs For Day Traders].

Click To Enlarge

Entering into a long position at current levels is attractive given the upside potential and more importantly because traders can more carefully manage their downside risk since TLT is sitting right on a major support level [see also How To Play A Treasury Bubble With ETFs].


If the latest FOMC minutes sparks a slight to safety, U.S. Treasuries could become a hot spot; in terms of upside, TLT has resistance at $125 a share followed by the $127.50 level. On the other hand, if the bulls return to Wall Street, TLT could continue to drag sideways if not trade lower; in terms of downside, this ETF has major support at $120 a share followed by the $115 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

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Disclosure: No positions at time of writing.