Alberto Costa argues US long-term Treasury ETF TLT is overextended at multi-year highs and warns against buying now. He recommends waiting for a retracement toward the moving average before accumulating, and cautions against FOMO-driven decisions.
Hi, welcome to this video on bonds. As I said in my previous video where I was discussing gold bond showed a similar pattern. We are looking here at TLT, that is an ETF tracking the 20 years treasury bond in the US market. And if you look what happened around June, beginning of June, but even a little earlier, I would say from here the price started to go up, up and then recently is going up. Parabolic. So the question you may have now is again the following. Is it the right time to buy bonds? And the answer from my point of view is similar to what I said for gold. That means no. Why? Let's look first at a longer term chart. For example the five years and you will realize that currently the price is high. It's very high. So again, if you are creating your portfolio, your investing portfolio long term and bonds are part of it, do you think is now the time to accumulate? No, because the idea of investing in the long term is that you want to buy when the price is low and you want to let the time pass so the price will go up. But if you buy when the price is like now, at the maximum, then it's very hard that you will make money. Because remember to make money if you buy, you should buy low and sell high. Now you may say, well true, but the price can go even higher. That's right. This is a good point. But let's look at the moving averages. As for the video on gold, if you have not watched, you can watch it. So you will realize that this kind of pattern where we have all these lines moving averages align like that is an indication of a strong uptrend. But if you see now the price is quite far from the 50 moving average, the blue line. And usually when the price is far for the moving average, it can go back, it can snap back. So this means that currently, because we are still far from the moving average is to me risky to enter because it's possible that the price will go down. I have to say that compared to gold here I see something better and I want to highlight this. You see this was the previous high. Okay. And if we draw a line, it seems that when, okay, this was in a few years back, I think it was 2016. So if we look now, what happened? The price tried to break this resistance and then it succeed. So you see the breakout here. And then the resistance was tested three times, 1, 2 and 3. So it may be that now this level is a support level and the price will not go below that and it keep going up fine, even if that was the case, I will still wait for the moving average to go close to the price. Because the risk is again that since we are so overextended, it will snap back. So it's a good point that we have a support level. But still I will wait the price to be closer to the at least the 50 moving average, this blue line. Okay? And the other thing that you should consider is that I know when you see something like that, all your emotion, the fear of missing out, the fear of you're not profiting from a great opportunity and everyone is making money. This kind of feeling may drive your action in the wrong direction. Because you may buy just because you feel you are afraid or you are losing something, the opportunity. So if you have this kind of feeling, my suggestion is wait a second, go back, look at the chart like that. Realize that you are far from the moving average. You are at a very high price. Realize that buying high and selling low is not the way to make money. And just be patient because eventually, if the trend will go up, the moving average will probably go around here. So you will be in a situation where the price and the moving average are not too far. And then is a better moment to buy. Like for example, what happened here. You see the price was far and then here it was close to the moving average. So this would have been a better. A better opportunity for buying than buying here or here. For example, why do you want to buy here? Wait for the price to retrace here and then you can buy. Okay, so just need to wait a little because eventually the price will go back to the. To the mean, to the moving average. And again, remember that the way your emotion affects your trading can be very dangerous. So be aware of that. Be aware that is not the right time to buy now. And even if you feel that you are missing an opportunity, I think being rational will pay off in the long term. So with that, I would like to conclude this video. Thank you for watching and please subscribe to this channel if you want to be updated when I upload new videos. And as usual, see you next time.
