Feb 1: Many analysts expect interest rates to continue down this year. The president has called for the Fed to lower rates during this election year in order to compete with most of the other major countries who have rates near zero already. Bond prices rise as interest rates are lowered.
Using fibonacci extensions, a trade on TLT (long term government bonds) has been triggered this week. The green line on the chart shows the buy level. This is based on the low of 111.90, then the high of 148.90, then the low of 134.46. At the level of the green line, price has clearly exceeded the 23.6% fibonacci level, indicating a high probability of reaching the 50% level of 152.95. Once the 50% level has been clearly exceeded, the 100% level at 171.45 is in play.
This setup is reinforced by the proportionality of the two down legs on this pattern. Note that the drop from August to November 2018 is similar in depth and duration to the drop from September to November of 2019.
A prudent way to trade this setup would be to buy with stops just below 134.45. The trader would have an OCO order to sell half of the position at or just below the 50% level and another OCO order to sell the other half just below the 100% level. Once the 50% sale is executed, raise stops to the green line to lock in profits.
Feb 12 update: The chart was updated today to show projected profit levels.
Feb 25 update: TLT almost touched the 50% target today with a high of 151.76.
March 3 update: As expected, the Fed lowered interest rates again. Trump has been putting maximum pressure on them to do so. Bonds remain one of the few bullish vehicles. TLT went as high as 159.70 today.
March 6 update: TLT went to a high of 169.33 today, just shy of the 100% fibonacci extension target identified on Feb 1.