High Yield ETF Poised For A Breakdown

By | November 27, 2018

The iShares $ High Yield Corporate Bond ETF (HYG) is sitting on an important technical level.

The $83 level has been both support and resistance on the weekly chart going back to the middle of 2017. Since that time the price of HYG has oscillated around this center line.

As the next Federal Reserve statement on interest gets nearer the HYG has been under pressure. A December rate hike is the consensus opinion and that will impact high yield issues.

The decline in the price of HYG over the last two months is reflected in the readings of the momentum indicators. Moving average convergence/divergence and the relative strength index are both below their center lines and tracking lower.

The money flow readings are equally bearish. Chaikin money flow has crossed below its center line and the accumulation/distribution line has crossed below its 21 period moving average signal line. These readings along with the jump in overall volume suggest the HYG is seeing institutional selling. (This is a weekly chart so the last volume bar and money flow readings are not complete.)

The chart of the High Yield ETF looks fragile at best. Poised for a breakdown is the more likely takeaway.

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