Tuesday, June 23, 2015

Corporate High Yield Bond Fund - Would You Buy Now Based on this Technical Analysis?

After harvesting gains in early May 2015 based on several technical signals, I have been sitting on the sidelines watching high yield bond funds first move sideways a bit and then decline in price after the pennant support break shown in our last post on HYG.

Now based on 6/22/2015 closing prices, the daily chart below shows that a corporate high yield bond mutual fund that we track has rallied a bit off an apparent long-term support line (solid green).  However, the price increase has brought the share price of this fund up near two potential resistance lines (dashed red) that could potentially stop this rally quickly and result in even lower prices in the near future.

Click Chart to Enlarge

From a "buy and protect" technical perspective, my strategy, IF I was interested in holding high yield bond funds because I decided they were an appropriate investment for me, would be to wait until the price rises just above these potential resistance lines before buying and then use these lines as support, which if broken, would trigger an immediate sell action to protect my initial investment from any significant capital losses.  If support holds, then I would continue to use technical analysis with an adaptive management strategy to potentially identify and establish higher support lines in order to protect to total gains (i.e., both dividends and price appreciation) until technical signals indicated selling was appropriate.

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) corporate high yield bond funds.  This is simply an example of how I may use technical analysis with a buy and protect strategy to invest.  I could lose money on an investment in corporate high yield bonds as could anyone else who uses this strategy.

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 junkbondrecycling.com in their entirety. The U.S. Securities and Exchange Commission website has guidance on selecting an investment adviser.

Financial Disclosure:
The author/publisher has no position in corporate high yield bond mutual funds at the time this article was written. This position may change depending on future price action.

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