Trade Idea: TLT / TBT (long)

As I explained last night in the "Week Ahead" post and as you probably know, I've been talking about TLT on and off for months, probably the better part of 2013 with a couple of small trades here and there and one open TBT long in the core positions which is at a decent gain, but big picture counter trend, a play on a TLT pullback which has worked fairly well so far.

Last night I said I thought the TLT trade is no longer theoretical, but now moving to a more actionable area and deserves attention now.

I wanted to see a pullback in TLT and I think we get it near term which should set up a long TLT position which will be executed by shorting TBT (the 2x leveraged inverse of TLT) to create a 2x leveraged TLT long.

However first, I'm looking for a TLT pullback which means TBT (it's 2x leveraged inverse or short 20+ year treasuries), looks actionable now.

 This is the big picture in TLT as I suspect there will be a rotation (there's evidence already of one) out of stocks and in to bonds. The exact reasoning I'm not sure of, whether a flight to safety driven largely by long only funds seeking some shelter from a market decline or perhaps the limited availability of the asset as the F_E_D owns a large portion of these and they are high quality collateral for banks. With the Treasury slowing their auctions for Treasuries this year, it may be an issue of tighter supply conditions.

 For the moment though I'm still looking for that TLT pullback as mentioned last night and this leading positive 2 min TBT suggests that's what's happening.

We have excellent migration that has set in very fast on the 3 min TBT chart, it's leading even more right now as it is moving fast.

I'm okay with a full size TBT long here, but there is a good possibility that TBT pulls back to for a wider reversal process, maybe a "W" or even a new low on a double bottom here (we'd essentially be at the top of the middle of a "W" base right now).

So I'll be adding TBT long, I think it has the potential to be a swing trade, although the evidence for that is not in place yet and would require a deeper pullback or a larger base.

If you are interested, but want to look at this in a higher probability way and don't mind possibly missing the trade (which I think is the smartest route to take), then set price alerts for a pullback at least to today's intraday lows or in the area and a few just under them.