Short term
Trade view / 30 June 2016 at 10:20 GMT

Treasuries ETF may need to retrace lower

Trader /
United States

Prices of longer-dated US Treasury notes and bonds as represented by the iShares Treasury Bond ETF (TLT;xnas) have rallied strongly again since last week's Brexit vote. 

Even over the past two days as equities and other risk assets were bid, treasuries held their gains. In the near term the TLT ETF looks to be in for some consolidation lower before a next rally stands better odds.

While stocks have seen a volatile going thus far in 2016, US bond prices have had a decisive bid underneath them despite the Federal Reserve's's flip-flopping on potential interest rate hikes. This bid in bonds, i.e. this drop in yields, shows that smart money investors don't foresee any dramatic interest rate increases anytime soon and likely thus also don't believe in any sudden new pickup in economic growth. 

I too am of this view and do think bonds remain a buy on dips.

On the multi-year chart we see that the post-Brexit rally in TLT has pushed it marginally above the 2015 highs and to the upper end of the up-trending channel (black parallels). Ultimately I do think prices will push above this horizontal resistance area but in the near-term it looks like a pause is needed to reset the chart.

Long-Term US Bond ETF - TLT
Source: eSignal

On the daily chart we see that the TLT ETF had two strong up-gaps last Friday and this Monday and has consolidated since. On Wednesday, TLT gave us a bearish engulfing candle, which is a further signal that upside in the near term may be limited and capped. 

Long-Term US Bond ETF - TLT

Create your own charts with SaxoTraderGO click here to learn more

Source: Saxo Bank

Management and risk description

I want to be rather near-term and tactical in this trade, which is to say that any strong daily close back above this week's highs around the $140 mark would be a sign to close the position.


Entry: sell short the TLT ETF or CFD at $139 or lower.

Stop: a daily close above $140.

Target: $136 and possibly $134 as a second price target.

Time horizon: two to four weeks.

— Edited by Michael McKenna

For more on ETFs, click here.

Non-independent investment research disclaimer applies. Read more


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail