US Junk Bonds May Surge Higher Despite Repo Funding Squeeze

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By :  ,  Financial Analyst

SPDR Bloomberg Barclays High Yield Bond ETF (JNK)

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Key Levels (1 to 3 weeks)

Pivot (key support): 107.70

Resistances: 109.46, 111.00 & 112.78

Next support: 105.55

Directional Bias (1 to 3 weeks)

Bullish bias in any dips above 107.70 for JNK and a break above 109.46 reinforces another potential upleg sequence to target 111.00 follow by the next significant medium-term resistance at 112.78.

However, a break with a daily close below 107.70 negates the bearish tone for a corrective slide to retest the major range support at 105.55.

Key elements

  • Since 30 Apr 2019, the price action has evolved into a 5-month “Cup & Handle” range configuration after a prior multi-month uptrend from 28 Dec 2018 low of 98.77. The “Cup & Handle” range configuration tends to indicate a potential bullish consolidation phase after a prior uptrend and a break above the “Cup & Handle” range resistance triggers the start of another up-trending phase.
  • The “Cup & Handle” range resistance stands at 109.46.
  • Momentum remains positive. The daily RSI oscillator has staged a leading bullish breakout from a significant corresponding descending resistance (in parallel with the Cup & Handle resistance). In addition, the daily RSI oscillator has not reached an extreme overbought level.
  • The 112.78 medium-term resistance is defined by the former major range support from May 2012/Dec 2014, the exit target projection of the “Cup & Handle” and the 0.764 Fibonacci expansion of the prior uptrend from 28 Dec 2018 low to 30 Apr 2019 high projected from 03 Jun 2019 low.

Charts are from eSignal 

Related tags: Shares market FOMC

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