Thursday, March 6, 2014

T. Rowe Price High Yield Municipal Bond Mutual Fund (PRFHX) - Channel Breakout and Overbought Conditions?

(click chart to enlarge)
3-Year Price Trend (daily, semi-log scale): High Yield Municipal Bond Fund (PRFHX)

As shown in the 3-year chart above, the recent rally in the high yield municipal bond fund (PRFHX) began in September 2013 time frame after a steep price decline that began in May 2013.  PRFHX recently broke above a rising price channel, much shorter in duration (so far), but similar to that which formed during the rally from April 2012 to January 2013. 

It will be interesting to see if PRFHX can stay above the upper channel line, which acted as resistance before the breakout.  The upper channel line may act as support, but is yet to be tested. 

In the second 3-year chart below, PRFHX appears to be in an "over-bought" condition based on the Relative Strength Index (RSI) and Bollinger Bands® (a registered trademark of John Bollinger).

(click chart to enlarge)
3-Year Chart (daily frequency, log scale) showing RSI and Bollinger Bands®

Going forward, we will be watching to see if apparently overbought conditions are alleviated with a short-term correction, and at the same time, the upper channel line is tested and acts as support.

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