TLT. Don’t nudge the pinball machine. It will TILT.

2010-08-24-tlt

http://stockcharts.com/h-sc/ui?s=TLT&p=D&yr=1&mn=0&dy=0&id=p20970412253&a=207054001

Very often trading/investing success hinges not on what you buy, but on what you don’t buy.  Here are some things to not buy:  TLT IEF LQD CIU BND TIP PTTDX.

But don’t take our word for it.  Think about it.  One of the rules of trend following is not to buy old trends, or issues in blow off mode.  These bond based issues can go on, and may well.  But the TLT is up 20% and note this.  Today’s gap is a runaway gap, following the breakaway gap of the 16th.  Owning this issue is now playing with fire, and you could wind up with a dragon tatooed on your back side.  And while technically this is a breakaway gap that remains to be confirmed.  It could well be instead a premature exhaustion gap.  Action over the next several days will reveal its true nature.

So we would stop our commitments in these issues up close.  In the TLT maybe 2% under the low of today’s bar.  The system stop is a lot bigger — 101.65.

Now for those who like to play with fire and dragons what high rollers do with these situations is buy the trend, but in  a small quantity, and watch it like a wasp watching a grape.  Probably on the hourly bars.  Don’t do this at home unless you’re a professional.

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