Got Junk? Death or Opportunity

You have heard it before, one person’s trash is another person’s treasure. Do you see a pile of junk or the material for your next masterpiece? It can be the same way in markets. The adage there is buy when there is blood on the streets. There may not be blood on the streets in high yield debt, but there sure is a sentiment shift that reads like it. Is this time to get out or your opportunity?

The chart below paints the picture using the high yield ETF $JNK. There are certainly some bearish aspects to this chart. First the RSI is in the bearish range and the MACD are falling. The price has also fallen below the 200 day SMA. Previously it has found a bid at that level, not this time. If that was not enough major bond market gurus are getting concerned. Could it fall further? Of course it can.

but there are also signals of a drop in price that is overdone. About that RSI, it is now oversold, like it was in August where it bounced. The price is also well outside of the Bollinger Bands®, often a place where price reverses. There is 6 month support nearby as well. None of these suggest you buy junk yet. You need confirmation of a reversal before that happens. But perhaps it is time to plan what you will create with this pile of trash.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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