Thursday, July 31, 2014

Corporate High Yield Bonds Funds Continue Their Tumble - At or Near Support Now?

[Quick Update: Friday's (8/1/14) price action was negative and suggests that support as mentioned below is not holding. NHINX  and VWEHX appear to have broken through support] 

Today's price action saw relatively significant declines in corporate high yield bond funds.  Below are 5-yr, daily, semi-log charts (unadjusted prices) for three corporate high yield bond funds that we track, including two very large total asset funds, VWEHX (Vanguard) and BHYSX (Blackrock), and NHINX (Neuberger-Berman), which has been an important indicator fund.

After today's drop, these funds are at or near support lines shown in green.  The charts also show based on RSI (Relative Strength Index - less than 30) that these funds are in significantly oversold conditions following the latest sell-off starting in early July (see previous posts).

The combination of price support and oversold conditions often represents a point off of which a significant longer-term rally originates or where at least temporary rebound occurs before further seller-driven declines below support. However, this does not rule out a continued decline through support without any positive price action.  

We cannot predict the future and since we took a defensive position weeks ago based on support breaks, we will continue to simply track and analyze price, and develop and implement an entry strategy, when it likely seems to be appropriate.

(Click on Charts To Enlarge)

Not Investment Advice | Important Disclaimer: 
The content in this article, including the identification and discussion of any specific security (e.g., bond fund), is NOT meant to be and should NOT be construed and/or used as investment advice. This article is for general information and educational purposes only. Please read the Disclaimers  for in their entirety. The U.S. Securities and Exchange Commission website has guidance on selecting an investment adviser.

Financial Disclosure:
The author/publisher holds no position(s) in any corporate high yield bond funds.

Base Chart Provided Courtesy of  Analysis and Annotation by (All Rights Reserved)

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