Lehman Treasury Bond iShares Moving Higher

02/19/04 11:32:44 AM

by Kevin Hopson

Even though shares of the Lehman 20+ Year Treasury Bond Fund continue to move higher, the longer-term picture still points to lower prices.

Security: TLT
Position: Sell

The Lehman 20+ Year Treasury Bond Fund (iShares - TLT) has continued to move higher the last several months. If you remember back to late last year, I was predicting an eventual rise in interest rates and a corresponding fall in TLT since the two (interest rates and bond prices) move in opposite directions. The reasons were that TLT was forming a bearish triangle at the time (illustrated by the green downtrend line and the bottom black parallel line) and also failed to test the median line of the black pitchfork before moving down to support levels. Both of these developments indicated a likely break to the downside.

However, bond prices have continued to move higher in recent months, making my initial analysis somewhat faulty. Still, the longer-term bearish picture remains intact. For example, notice how TLT looks to be forming a rising wedge, as illustrated by the blue uptrend line and the bottom black parallel line. Rising wedges are considered bearish, as this type of formation tends to lead to a downside breakdown. Additionally, the fact that TLT continues to hug last August's uptrend line without testing the black median line (price failure rule) indicates weakness and should lead to an eventual break of uptrend support.

Graphic provided by: Stockcharts.com.

There are some other things worth noting too. The relative strength index (RSI) and moving average convergence/divergence (MACD) have been meeting resistance just below the 70 and 1.0 levels, respectively. This has occurred in light of higher prices. In other words, until these indicators can move higher, the bearish outlook will remain intact. Though it is difficult to predict when and where the rising wedge formation will reverse, TLT appears to have significant resistance around $89.30, the site of the 50 percent retracement level from June '03 to August '03 decline and the blue uptrend line. As a result, I would continue to sell into strength and look for a possible reversal around the $89.30 level.

Kevin Hopson

Kevin has been a technical analyst for roughly 10 years now. Previously, Kevin owned his own business and acted as a registered investment advisor, specializing in energy. He was also a freelance oil analyst for Orient Trading Co., a commodity futures trading firm in Japan. Kevin is currently a freelance writer.

	Glen Allen, VA
E-mail address:	hopson_1@yahoo.com

Click here for more information about our publications!

PRINT THIS ARTICLE

Request Information From Our Sponsors

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

Comments or Questions?	Article Usefulness
	5 (most useful) 4 3 2 1 (least useful)

TECHNICAL ANALYSIS

Lehman Treasury Bond iShares Moving Higher

SUBSCRIBE TO OUR FREE EMAIL NEWSLETTER!

SUBSCRIBE TO OUR FREE
EMAIL NEWSLETTER!