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by Arthur Hill
The iShares 20-year T-Bond Fund is digesting a sharp decline with a rising flag, and a support break would signal a continuation lower.
Position: Hold
Arthur Hill
Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.
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FLAGS AND PENNANTS
Bear Flag For Bond ETF
02/13/06 08:01:30 AMby Arthur Hill
The iShares 20-year T-Bond Fund is digesting a sharp decline with a rising flag, and a support break would signal a continuation lower.
Position: Hold
| In November and December, the iShares 20-year T-Bond Fund (TLT) moved from below 88 to above 92.5. The bond exchange traded fund (ETF) met resistance around 92.5 in late December and again in mid-January 2006. This looked like a normal consolidation within an uptrend, but TLT proceeded to break support at 90.75 with a gap-laden decline at the end of January. A negative divergence in MACD accompanied the twin peaks at around 92.5 and momentum is now negative. |
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| FIGURE 1: TLT. TLT formed a rising trendline (in magenta). |
| Graphic provided by: MetaStock. |
| |
| The sharpness of the decline, support break, and gap indicate that this was a trend-changing event. TLT became short-term oversold around 90.5 and then consolidated over the last few weeks. Oversold conditions can be eased with a bounce or a consolidation. TLT did a little of both and formed a rising flag (magenta trendlines, Figure 1). This is a bearish consolidation pattern, and a move below last week's low (90) would signal a continuation lower. The initial downside target would be the November low around 88. |
| Trading has been quite volatile within the flag as the bulls and bears slug it out. TLT formed a long white candlestick on February 3 but did not follow through (green arrow). After a small decline, TLT bounced off support at 90 with another long white candlestick (gray arrow). The bond ETF again failed to follow through and formed a long black candlestick on Friday. There is clearly a battle raging within this consolidation, and I will be watching the boundaries to identify the winner. The bulls win on a break above 91.5 and the bears win on a break below 90. |
Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.
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Date: 02/13/06Rank: 4Comment:
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