What a journey it’s been for us with the Treasury Bond ($TLT) since the late March when we were accumulating our core positions at $108-$109ish. We have been heavily positioned with Call options (LEAPS) since then, and it has been almost 5 months now as we are still holding full positions. We initially did close out about 60% of our positions on 5/15/14 @ $114ish to take profits and then we got back in on 6/25/14 @ $112ish and then added more 7/17/14 open @ $113.90ish.
It has been extraordinary to see how the Treasury Bond has been moving higher along with the equities (see previous article about it), and I guess this has been an unprecedented event we are witnessing. Soon or later, though, I do think they will be separating and that’s when we can possible see a true launch on the Treasury Bond.
As it clears our first target of $116 (our targets chart created on 5/14/14), we are eyeing on $120-$124 as our next targeted areas to start to take some profits. I would like to share with you some charts that we have been watching and why we were confident that the bond market was going to move higher and why we think it’s probably going much-much higher than what anyone expects.
Daily Charts
I show you this chart to prove you that history repeats itself and that’s why technical analysis work. It may not play out the exactly the same way but it will play out in a similar way.
Notably you can see that, we are continuing to cultivate higher-lows and higher-highs, that’s exactly what you want to see for the primary trend to continue; and continue to be strengthened/established. For a long-term trader like myself, it’s imperative that I speculate and ascertain the ‘big picture’ so I see where the things are moving in a ‘big picture’. In other words, where the wind is blowing in a primary term. I think too many traders are focused on what’s happening in a span of only few days thus missing out what’s happening in the ‘big picture’.
As we broke out to the new highs on Friday, we made a new high. That’s what’s more important than trying to figure out if we are going to pull back on Monday or continue higher. Why? Because I really don’t care of daily fluctuations because we all know nothing goes straight up. Either it pulls back down to about $116ish to retest or not, I do think we have very high probability of getting to $120-$125 which is our next target. Daily 50EMA, 100/200SMAs are all rising which indicates that the trend (primary) is healthy.
Recent Charts
[Daily Chart]
This analysis was done on the night of the 14th as we were anticipating and concluding that a breakout is possibly coming as it cleared recent resistance line (blue dotted) while holding a uptrend support (red).
Next day, we had a nice breakout and held. Again, I really don’t care if it’s going to pullback or not. What I care is the most is that the trend development is still happening. And with the new highs we made yesterday, bulls are very much in control and gaining momentum here.
Weekly Charts
This weekly chart was first featured in my earlier post (see it here) showing that we are breaking above the long-term downtrend resistance line (red) while holding so well above the pivot level (blue dotted). In pure price-action, this is a very bullish signal.
Let’s check how it played out after about a month.
As you can see, we are doing very well looking at this week-ending weekly chart, trading further and further away from that long-term downtrend resistance.
If we can clear $125, I see $128 as next resistance then, $132ish.
Ultimate Targets
[Weekly Chart]
I know, we are still much early to say that the Treasury Bond is going to above $150. But it could, looking at the past-historical price action. But there is a requirement for the Bond to get up to $150-$160. The equity market must see a steep correctional move (see a monthly chart from 5/14/14) like it did back in summer of 2011 and the May-June of 2012 on the S&P 500. If we see similar activity on the equities, I do see the Treasury Bond getting up to as high as $160 looking at this Fib. Expansion analysis chart.
Well, I do think the equity market steep-correction is coming but I am not sure when. If I had to guess, maybe by the late spring of 2015 but I’m just guessing. But we are very confident that the Bond market will do very well, and we are going to continue to hold our positions to our targets but with our strategy, we will be taking profits at our targeted level and adding more on a pullbacks. After hitting our next target of $120-$125, I do think another pullback might be coming (when I say a ‘pullback’, I mean a cycle within a trend to create higher-lows), and we will be getting ready to add to our positions again at that time. What I always say is that we don’t ‘freak out‘ on pullbacks, but we calmly embrace it because after a pullback, much bigger move is ahead.
