There is a turnover happening in the market and Todd Gordon of Ascent Wealth Partners is considering a bond game.
The shares sold on Tuesday, with Apple pushing down the Dow Jones after the tech giant said the coronavirus epidemic would likely lower revenues. But, thanks to a rotation in more defensive sectors – which generally occurs when interest rates fall – and a Federal Reserve that Gordon describes as “pending”, the technical analyst wants to trade TLT 20 + Treasury bond ETFs at + also protect against selling pressure.
“First, I want to protect the gains that we have accumulated in our portfolio here, [and] I also want to recognize that we are seeing rotation in sectors that generally respond to lower interest rates, “he said on CNBC’s” Trading Nation “on Tuesday.
Gordon wants to play for a continued increase in bond prices, pointing out on a TLT chart that bonds have been in a “nice uptrend” for years. Given the ups and downs of this uptrend, Gordon said he thought the TLT had not reached its resistance at around $ 150, which is the upper end of the channel.
Gordon also points out that a “cup and handle pattern” is again forming in the TLT graph. It is a sign that TLT should increase, based on the previous ETF movement.
Gordon wants to buy the weekly calls from March 145 to 145 strikes and combine them with the sale of weekly calls from March 150 to 150.5 strikes for a total debit of approximately $ 1.92.
This means that if TLT approaches $ 145 by the end of March 27, Gordon will lose the $ 192 he paid for the trade. But if TLT closes above $ 150.50, Gordon could make up to $ 358 on the trade.
TLT rallied this year – the ETF is currently up more than 7% in 2020.