A Rounded Reversal and Support Level To Watch In This Popular Bond ETF (TLT, TBT, SHY, IEF, TBF)

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March 16, 2012 10:59am NYSE:IEF NYSE:SHY

Corey Rosenbloom:  TLT is a popular proxy for traders and investors to watch for bond prices, or to use as a hedging or trading vehicle.


Let’s take a look at the recent “Rounded Reversal Arc” in price which now challenges its first potential support target on this week’s recent breakdown.

Here’s the Daily Chart “Arc” Pattern into Support:

“Rounded Reversal” or “Rounded Arc” patterns are a type of Distribution pattern that represents an orderly transfer from demand (buyers) to supply (sellers).

The alternate way for price to reverse is a more violent “spike” which we often call a “V-Spike Reversal.”

Anyway, you can see how the lengthy negative divergences developed during the agonizing flat or “consolidation” period from November 2011 to present which culminated in this week’s strong support breakdown.

At the moment, the TLT chart is challenging its first/initial downside target near $110, which is the overlap of the rising 200d SMA (important) and 38.2% Fibonacci Retracement as drawn.

The weekly chart also shows a similar confluence with the rising 50w EMA:

The rising 50w EMA also comes in at the $110 level ($109.15 now) which makes the $110 region the critical potential support price level to watch.

As with all confluence or price pivot levels, we often drop to lower timeframes to assess the chart picture/signals there.

At these critical chart junctures, price can either support/bounce off of them (an aggressive trade for short-term bullish traders) or else break sharply through them (a breakdown entry for bearish traders).

Generally, when price firmly breaks under a confluence support level, it continues on to lower respective targets which would immediately expand to $107.50, $103, and perhaps even as low as $100 again.

But don’t get ahead of the price until we get official signals via breakdowns of these levels.

For now, watch how price trades relative to the $100 confluence in TLT – either retracing up off it for the moment… or crashing down through it to lower levels.

Related: ProShares UltraShort 20+ Year Treasury ETF (NYSE:TBT),  iShares Barclays 7-10 Year Treasury Bond Fund (NYSE:IEF), ProShares  Short 20+ Year Treasury ETF (NYSE:TBF), iShares Barclays 20+ Year Treas Bond ETF (NYSE:TLT), Barclays 1-3 Year Treasury Bond ETF (NYSE:SHY).

Written By Corey Rosenbloom, CMT From Afraid To Trade

My name is Corey Rosenbloom, CMT (Chartered Market Technician) trader, educator, analyst, and I am excited to share with you my experiences studying and trading the markets and to hear from you regarding your experiences, challenges, and frustrations, and successes.  My goal is to create a community dedicated to reaching out to those who  have been burned by the market or are anxious about risking their money to make money in the stock, options, or futures markets. Together, we can share strategies and learn how to overcome crippling fears that keep us from achieving our highest potential.


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