Wednesday’s ETF Chart To Watch: Barclays TIPS Bond Fund (TIP)

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Stocks popped higher at the open although bullish pressures cooled off as profit-taking swept over Wall Street in the final hours of trading. Better-than-expected retail sales on the homefront kick-started buying in the morning hours, although lackluster economic growth readings from Germany and the eurozone kept a lid on investors’ confidence. Looking ahead, the health of the U.S. housing market will come into focus as the home builders index data come out later today along with July housing starts later in the week [see also 7 Simple & Cheap ETF Model Portfolios].

For the time being, investors will remain focused on home as the latest CPI report hits the street at the opening bell. As such, the iShares Barclays TIPS Bond Fund (TIP, A+) is our ETF to watch as it may gap in either direction following the reaction to the most recent U.S. inflation data; analysts are expecting for the consumer price index to come in at 0.2% after coming in flat last month [see also 5 Surprising Facts About Hyperinflation].

Chart Analysis

TIP is currently enduring a healthy correction after recently hitting an all-time high at $121.97 a share on August 2, 2012. Since then, this ETF has declined back below $120 a share an appears to be headed towards its rising support line (blue line) which falls right above its 200-day moving average (yellow line). Nonetheless, TIP appears quite resilient at current levels seeing as how it previously kept its head above $119 a share in late June of this year before resuming its march higher [see also Monthly Dividend ETFdb Portfolio].

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TIP

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Conservative investors should wait and see as this ETF establishes support back above $120 a share before jumping in long. Traders with a stomach for risk may find current levels attractive given that TIP is trading near the bottom half of its upward sloping trading channel, assuming the longer-term trend remains intact [see also 3 ETF Trading Tips You Are Missing].

Outlook

Demand for inflation-protected securities may climb tomorrow if the latest CPI report shows a worrisome uptick in inflation; in terms of upside, TIP has potential resistance near the $121 level. On the other hand, bearish pressures in the fixed-income market could drag this ETF even lower; in terms of downside, TIP has support at the $119 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

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Disclosure: No positions at time of writing.

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