Conclusion, Investment Implications, Strategy

The iShares 20+ Year Treasury Bond ETF (TLT) is currently rising from a successful mid June test of its late 2018 benchmark lows.  A sustained rise above the 116.76 area will target at least an additional 7% rise to 127.50.  A significant upcoming rise in TLT would suggest a continuation of the current decline from the 3.25% area in the yield of the US 10-Year Treasury Note.

Analysis and Rationale

The iShares 20+ Year Treasury Bond ETF (TLT) will invest at least 80% of its assets in the component securities of the underlying index, and it will invest at least 90% of its assets in U.S. Treasury securities that the advisor believes will help the fund track the underlying index. The underlying index measures the performance of public obligations of the U.S. Treasury that have a remaining maturity greater than or equal to twenty years.

Chart 1 below plots TLT daily since January along with its 200-day moving average, a widely-watched major trend proxy.  The green highlights identify a bullish chart pattern, an inverse head and shoulders, that was confirmed by a breakout from the pattern on Jly 25th.  A sustained rise above the breakout area at 116.76 will target at least an additional 7% rise to 127.50.

Chart 1

Chart 2 below plots TLT weekly since 2018 and shows that, bigger picture, the bullish chart pattern highlighted in Chart 1 emerged as a result of a mid June successful test of formidable underlying support at the 111.90 November 2018 benchmark low.  This successful support of a previous major low in TLT improves the likelihood that a significant move higher will begin from it.

Chart 2

Risk/Reward

Table 1 below shows that considering an 133.20 upside target with a protective stop placed below the 115.15 area, a long entry price of 119.00 would provide a 1:3.7 risk/reward ratio (risking $1.00 to make $3.70) with an initial risk of 3.2%.

Table 1

 

Click Here for a table containing all of our current stock, ETF and index ideas.

Please consult the table showing our Asbury 6 key market metrics to help determine if this investment is suitable for you.