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Extended on the Monthly

TLT Monthly-Chart with Stochastic Indicator

So let me explain what’s happening in the above chart with different annotations.

First, we can see that monthly-stochastic is at a “overbought” territory as I have annotated with highlights looking at the historical perspective.  Since 2005, when Stochastic reading is above “80”ish, it is considered “overbought” as the price tends to either pullback before moving higher or completely roll over.

So there were two occasions (2008 & 2012) that the Treasury Bond (TLT) pulled back 4-6 months before going back up, however, there were four occasions (2005, 2009, 2011, late-2012) that the Treasury Bond completely rolled-over after hitting that “overbought” status on the Stochastic.  So I think the question remains, would we pullback for several-plus months before going higher or would we completely roll-over.  I think we will know answer to that question as we get more data to substantiate certain allegations I have annotated on this post.

I also want to keep your attention to the candle-sentiment as I have circled (in red) unusually long candles after a prolonged uptrend.  Many times, these unusually long candles (after a prolonged uptrend–not start of an uptrend) can represent the “final push” from the buyers, which it can quickly turn to a disaster (keep in mind, we are talking about monthly chart so when I say “quickly” I mean quickly in the monthly time-frame).

I must warn you though that we are only talking about certain insinuations with possible outcome; but we don’t have anything concrete (tangible data) to affirm and confirm such allegation as of today.  So these signals are helpful not in a way to start short-selling or buying puts; but in a way to start taking profits or close all winning-positions completely.

And that’s exactly what we did with our current positions.

All Positions Closed

TLT Daily-Chart

This was about 2-months of position trading that ended very well for us.  I didn’t expect to get to $135 level this quickly; but we are very satisfied with gain, and completely comfortable to close everything out at this level.  Can it go higher in the minor/intermediate term?  As far as price-sentiment is concerned, benefit of the doubt still goes to the buyers in the minor, intermediate, and primary term as of today as we are still holding above 10EMA (daily).  I think if we do get below $131ish, $128-$125 might be where its headed.

If it retests daily-50EMA (currently at $126.78), I may think about going back long with good confirmation of a bounce; but because of the monthly-chart insinuations I have presented here on this post, the size of that position will be much smaller (if I do even decides to get in–and I would have to check that monthly-chart again at that time).