Saturday, February 21, 2015

Corporate High Yield Bond Funds Breaking Above Another Support/Resistance Line?

As shown on the two charts below (weekly closing prices), high yield corporate bond funds HYG (ETF) and NHINX (MUTF) appear to be breaking (or attempting to break) above another longer-term line (solid green, reaction points circled in blue) that has acted as support and resistance in the past. We may have a clearer picture of this apparent/attempted breakout after next week.

These charts also show that these two funds have cleared the descending price channel/wedge that defined a shorter-term downward trend that began last summer.

Currently the Relative Strength Index ("RSI", upper part of chart) indicates overbought/oversold conditions in the neutral range.  The current rally beginning in mid-December 2014 off a longer-term support line began from the most oversold conditions (per weekly RSI) since the 2008-9 market "crash". 

Investors who purchased corporate high yield bond funds in mid-December 2014 at long-term support have done relatively well so far in terms of capital gains and dividends with total return approaching 6 percent (last chart)

Click Chart to Enlarge

Click Chart to Enlarge

Click Chart 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 has positions in several corporate high yield bond mutual funds at the time this article was written

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