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

by on April 10, 2013 | ETFs Mentioned:

Last Friday’s disappointing employment report is already ancient history as investors have re-focused their attention on corporate earnings season at home, which Alcoa has kicked off on a strong note after the aluminum giant reported better-than-expected results.

The iShares Barclays 20 Year Treasury Bond Fund (TLT, B-) will make its way onto our radar screen later today as investors move in an out of safe haven assets depending on the latest FOMC minutes. Hints of monetary policy changes from Chairman Bernanke can lead to volatile trading for TLT as investors scramble to re-balance their portfolios in accordance with the latest commentary from the Fed [Download 101 ETF Lessons Every Financial Advisor Should Learn].

Chart Analysis

Consider TLT’s one-year daily performance chart below. Since peaking at $132.22 a share in late July of 2012, shares of TLT have entered  a steady downtrend; notice how this ETF has managed to post lower-highs (red line) and lower-lows after each attempt at resuming its once strong uptrend. Furthermore, TLT slipped below its 200-day moving average (yellow line) at the start of 2013, right around the time when equity markets kicked into high gear, further showcasing the clear rotation among investors shifting assets out of safe haven Treasuries and into riskier equities [see How To Take Profits And Cut Losses When Trading ETFs].

Click to Enlarge

TLT appears to be gearing up for a rebound in recent weeks, judging by the fact that it managed to hold above $116 a share while also steadily climbing higher. What’s concerning is that this ETF failed to summit its 200-day moving average last week, similar to its price pattern in late December last year when it also failed to re-conquer the $124 level. As such, we advise conservative investors to hold off on jumping in long until TLT has established definitive support above $120 or even $125 a share, depending on individual risk preferences [see ETF Call And Put Options Explained].

Outlook

If the latest FOMC minutes hint at a potential tightening of monetary policy sooner than markets are anticipating, TLT could face selling pressures. In terms of downside, this ETF has near-term support at $120 a share followed by the $116 level. On the other hand, continued easing and a pessimistic outlook could inspire a rally in Treasuries; in terms of upside, this ETF has stiff resistance right 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.