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

by on June 6, 2012 | ETFs Mentioned:

European debt drama continues to plague the global market, although investors were able to brush aside the cloud of uncertainty yesterday thanks to encouraging data from the home front. ISM nonmanufacturing data came in better-than-expected, helping to inspire bullish pressures as equity indexes snapped their losing streak; this figure came in at 53.7%, inching past the expected 53.5%. Gold and oil drifted sideways amidst the bargain buying wave on Wall Street; futures prices for these commodities settled near $1,620 an ounce and $84 a barrel respectively for the day [see 5 Tips ETF Traders Must Know].

Investors will likely keep their eyes fixated on the home front tomorrow as the latest Fed Beige Book report hits the street. As such, our ETF to watch for the day is the iShares Barclays 20 Year Treasury Bond Fund (TLT) which may experience volatile trading as investors react to the latest economic commentary and weigh the possibility of additional stimulus later this month [see also Bond ETFs For Every Objective].

Chart Analysis

TLT has staged a “textbook bounce” so to speak over the past two months; notice how this ETF barely slipped below its 200-day moving average (yellow line) in mid-March and early-April of this year before resuming its longer-term uptrend. This ETF is now trading in uncharted territory, seeing as how the high of $130.38 a share set on 6/1/2012 is actually an all-time high for TLT since its inception in mid-2002 [see also ETF Technical Trading FAQ].

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From a technical perspective, this ETF appears poised to continue higher over the coming weeks given the sheer volume which has bolstered its most recent leg-up. Above-average trading volumes in the past few sessions may be interpreted as a bullish signal that buying pressures will continue, seeing as how TLT was able to fairly easily summit its previous resistance at the $125 level. Furthermore, from a fundamental perspective, the potential announcement of an additional round of stimulus is sure to propel Treasuries even higher [see also How To Play A Treasury Bubble With ETFs].


The Fed Beige Book may be interpreted one of several ways. If the latest economic commentary is less-than-encouraging, investors may still be cheerful as the possibility of further stimulus increases. Likewise, a sell-off could just as easily occur depending on how investors interpret the latest economic insights from the Fed. In terms of upside, TLT will first need to re-conquer the $130 level before marching any higher. If the latest Fed Beige Book paints a gloomy outlook for Treasuries however, TLT may endure a correction. In terms of downside, this ETF has viable support at around $124 a share. 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.