Are Treasuries On The Verge Of A Breakout?

After a tumultuous year in 2013, treasures are enjoying a nice ride up in 2014. Yields on the long end of the curve keep falling – albeit pretty slowly. The 10-Year Note is up 2% this year while the 30-year bond has enjoyed a 7.8% rally so far. The Federal Reserve might be buying bonds but it’s been tapering since late last year. I could give and link to a hundred reasons as to why the yields on the long end are falling, but none of that is really actionable (although it is interesting to debate!).

I noted last year that Treasuries were poised to sell off - and they did. We saw the $TLT sell off all the way to 102, where it was hanging onto dear life- which it did. After setting a double bottom (after a failed breakdown), we’ve seen it grind higher to the (weird) surprise of many. Now, it might be on a verge of a breakout. Let’s go to the chart.

The Chart

The chart below is a little messy, but bear (no pun intended) with me. After having the massive selloff, we based around 102 and bounced. Now we’re up against this ~114.50-115.50 zone (the thin, long rectangle). You can see that it acted as support a few times before finally breaking. It recently acted as resistance. Now we’re testing it once more. RSI isn’t oversold we’re trading above all the major moving averages (20, 50, and 200) as they face upwards (a bullish sign).

There’s not much to not like here. Above 115.50 and I can see us making a run to the ‘right shoulder’ of ~123.50. We still have to clear this zone, but it looks like we’re on the verge of doing that. Upside moves are much slower than downside, but I wouldn’t be shocked if we finished year-end with $TLT trading near the target price.

$TLT - iShares Barclays 20+ Year Treas Bond Weekly Chart

TLT Weekly



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