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Long Trade Idea on TLT Declines

The Trade Idea: As long as TLT trades above $113.85, then new long trade ideas can be initiated on declines. Depending on your entry and room you want to give the trade, use a risk price between $117.68 and $113.85, says Landon Whaley of Focus Market Trader.

The iShares Barclays 20+ Year Treasury Bond ETF gained 49 basis points last in the week ending February 23 and has declined 6.9% to start 2018.

The Gravities

TLT’s Fundamental Gravity is being driven primarily by the latest Fed rate hike, which is bullish.

Quantitatively, TLT is beginning to build a bullish profile. Momo, our proprietary measure of momentum, bottomed on Valentine’s Day and has been gaining bullish steam ever since.

Confirming this bullish shift is Barometric, our proprietary measure of buying pressure, which has been building since February 6. What’s more, both of these critical measures of the market’s underlying structure are shifting to a bullish profile while Volatility, our measure for a market’s irregularity, declines. When Momo and Barometric gain bullish ground alongside a decline in Volatlitlty, it’s typically a recipe for higher prices.

Behaviorally, investors have added $360MM to TLT during 2018, which means money has now flowed into TLT for three consecutive weeks. Retail investors are behaving benignly, while institutional investors are staring to cover some of their short positions.

The Bottom Line

TLT’s Fundamental Gravity is bullish, the Quantitative Gravity is starting to live that bullish lifestyle and the Behavioral Gravity remains bullish.

When the three Gravities stack up this way, we hold a long bias and get involved with a trade idea.

The Trade Idea

As long as TLT trades above $113.85, then new long trade ideas can be initiated on declines from Friday’s close. Depending on your entry and how much room you want to give the trade to move, use a risk price between $117.68 and $113.85. If TLT touches your risk price, even for a second, close all open trade ideas.

Landon Whaley is editor of Focus Market Trader and CEO of Whaley Capital Group.

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