Trade Idea: iShares 20+ Year Treasury Bond ETF

01/24/2018 2:30 pm EST

Focus: ETFS

Landon Whaley

Editor, Focus Market Trader

Trade idea: As long as TLT trades above $121.66, then new long trade ideas can be initiated on declines to $123.91, or lower. Depending on how much room you want to give this idea, use a risk price between $123.33 to $121.66. writes Landon Whaley of Focus Market Trader.

The iShares Barclays 20+ Year Treasury Bond ETF (TLT) declined 90 basis points in the week ending January 19, and has lost 2.7% for the year.

Fundamentally, TLT is being driven by the latest Fed rate hike, which is very bullish.

Quantitatively, TLT has nearly twice as much upside potential as downside risk in the six months following a Fed rate hike.

Social, our proprietary trend indicator is currently in sleep mode and only time will tell whether it wakes up in party (bullish) or hangover (bearish) mode.

Momo, the WGR momentum indicator, is at its lowest level in over six months, but remains bullishly tilted.

Finally, Barometric pressure, our proprietary measure of buying pressure, continues to build implying more bulls than bears.

Behaviorally, investors have added $32MM into TLT, which is now showing positive inflows for the first time in months.

Remember, most investors believe the misconception that a Fed rate hike pushes U.S. yields higher. But history shows us that investors don’t sell bonds in response to rate hikes; rather, they gobble them up.

All three Gravities are bullish, and so is our bias.

Trade idea:

As long as TLT trades above $121.66, then new long trade ideas can be initiated on declines to $123.91, or lower.

Depending on how much room you want to give this trade idea, use a risk price between $123.33 and $121.66. If TLT touches your risk price, even for a second, then you should exit any open trades.

If the trade moves in your favor, then you could consider using the price range between $124.48 and $126.17 as your profit target.

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