Monday, May 25, 2015

High Yield Muni Bond Fund (ORNAX) Moving Off Rising Channel Support?

ORNAX appears to be moving off rising channel support (solid green line), which dates back to early 2014, as shown on the daily closing price chart below. The chart also shows that the fund was relatively oversold (per RSI - upper part of chart) when the price hit channel support, and that a positive or "bullish" MACD crossover has also now just occurred (middle part of chart) based on our customized (more sensitive) parameters (i.e., 8,18,6).

ORNAX has dropped about 3.6% from its February 2015 highs before hitting this apparent support line - a relatively mild correction (in my opinion anyway), but enough to erase the value of roughly 6-7 months worth of dividend payments.

Click Chart to Enlarge

Late last week I purchased this fund for a personal non-IRA account for the three technical reasons identified above (i.e., positive move off support, oversold, and bullish MACD crossover). 

Please recognize that this fund has a relatively higher yield than most high yield muni funds but it is also considered to be relatively riskier compared to other high yield muni funds, at least by Morningstar - link: ORNAX.  

Note also that this fund may carry a load (fees) depending on how/where you buy it - I purchased my shares through TD Ameritrade (TDM) where the load fees are "waived" - I would not buy this fund otherwise. The only fee I am aware of through TDM is a short-term redemption fee of $49.99 if the shares are sold within 120 days of purchase.

I will use the solid green support line to manage my initial risk to capital.  So, if the price falls below this line (support breaks), I will sell as soon as possible.  If support holds, then I will "adaptively" manage my position based on further technical analysis to determine how long to hold before harvesting gains - ideally, I would like to hold along time, but the market really decides this. 

Using this basic "buy and protect" approach, I intend to limit my losses (if any) to a fraction of a percent (capital losses and redemption fee) if support breaks, while maximizing gains (dividends and capital gains) if support holds.

Again, as clearly indicated below and elsewhere on this website in more detail, this is not investment advice - nothing in this post should be construed as advice or a recommendation to buy (or sell) ORNAX or any other high yield muni fund.  This is simply an example of how I am using technical analysis with a buy and protect strategy to invest.  I could lose money on this investment as could anyone else.

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 owns municipal high yield bond mutual fund at the time this article was written. This position may change depending on future price action without further notice.

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