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Thursday’s ETF Chart To Watch: Barclays 20 Year Treasury Bond Fund

December 22nd, 2011

Stoyan Bojinov: Investors were a bit anxious to jump into the equity markets on Wednesday ahead of the U.S. GDP report, while Oracle’s disappointing earnings didn’t do much in the way of restoring confidence. The European Central Bank laid out a $641 billion three-year loan program for the regions banks, in an effort to ensure liquidity and stability in the financially fragile currency bloc. Gold futures drifted sideways as equity indexes remained fairly flat, settling near $1,615 an ounce. Crude oil on the other hand soared higher amidst the uncertainty, finishing the day just above $99 a barrel.

Investors will turn their attention to Wall Street tomorrow as the latest U.S. GDP report is released. The iShares Barclays 20 Year Treasury Bond Fund (NYSEARCA:TLT) is our ETF to watch for today as it may experience increased trading activity after investors digest the latest economic growth data at home. Government bonds may take on safe haven appeal if the latest GDP results miss the 2.0% growth expectations [see Are Gold ETFs The Best Defense Against Euro Drama?].

Chart Analysis


Since recently hitting an all-time high at $125.03 a share on 10/4/2011, TLT has endured a minor correction down to the $110 level. When we consider the chart below, it becomes apparent that TLT held support at $110 a share and went onto rebound over the following weeks, once again nearing resistance around the $125 level towards the upper-half of its trading range. This ETF has been establishing rising levels of support since the beginning of August 2011, which is when Standard & Poor’s downgraded U.S. credit quality [see TLT Returns]. TLT recently encountered resistance below the $125 mark on 12/19/2011, then proceeded to consolidate lower back below $120 a share in the days following.

Click to Enlarge

TLT remains in a strong uptrend, although the fund may be due for a larger correction from a technical perspective; notice that TLT has tried, and failed, three times to summit the $125 level in the past three months [see Ten Unexpected Observations On YTD ETF Returns].

Outlook

If U.S. GDP blows past analyst expectations, investors could find themselves in a buying frenzy before the extended holiday weekend. In terms of downside, TLT may slip lower to the $115 level, although investors should note that major support lies at $110 a share. On the other hand, if economic growth comes in weaker-than-expected, selling pressures may sweep over Wall Street [see The Five Biggest ETF Inflows Of 2011]. Likewise, TLT could surge higher bolstered by safe haven demand. In terms of upside, this ETF may climb back up to $122 a share, although short-term traders ought to exercise caution around the $125 mark, seeing as how this is a significant level of resistance. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.

Written By Stoyan Bojinov From ETF Database Disclosure: No Positions

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NYSE:JNK, NYSE:TBT, NYSE:TLT


 

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