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Lehman Treasury Bond Fund Bumping Up Against Key Resistance

08/19/04 11:35:22 AM
by Kevin Hopson

The Lehman Treasury Bond Fund has rebounded nicely off of its May low but is the rally over?

Security:   TLT
Position:   Hold

The Lehman 20+ Year Treasury Bond Fund iShares (TLT) have made significant headway since bottoming out in May. Prices have appreciated roughly 10 percent since then and recently broke key resistance around $85.80, the site of the green median line and the 61.8 percent retracement level from the March-May decline. As a result, the short-term trend continues to be positive.

However, you will notice that prices are now approaching a significant confluence of resistance around the $87.00 level. All of the downside gaps from the March-May decline have been filled with the exception of April's initial gap, as shown by the dotted red line. Since prices tend to reverse in the direction of the gap once it is filled, longer-term bond prices could turn lower soon.

Graphic provided by:
Also, notice how the blue median line and the black median line have converged in this area, thus adding resistance here. This being the case, the probability of a reversal at slightly higher prices is pretty decent. However, if bond prices can overcome key resistance at $87.00, shares should eventually make their way back up to the $90.00 level, which is the site of March's high, the top blue parallel line and the top black parallel line. Since the jury is still out, I would continue to hold shares of TLT and await further developments.

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:

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