BKLN Invesco Senior Loan ETF Monthly Chart; Overbot; Rising Wedge; Negative Divergence; Upper Band Violation; Price Extended

BKLN, an exchange-traded fund that buys leveraged loans, catapults higher (look at the large white candlestick two weeks ago), into the stratosphere, after bond king and much-followed Wall Streeter Jeffrey Gundlach says the fund is a good investment for a retiree looking for a +7% annual return.

Bingo. Big blocks of BKLN trade hands immediately the bulls coming in like madmen pushing the price from 22.2 towards 23.0. Everyone is patting themselves on the back at how they now own an ETF that will provide that steady +7% return. What dolts.

The BKLN monthly chart exhibits overbot stochastics and RSI both agreeable to a pullback. The red rising wedge is an ominous pattern that ends in misery, sadness and despair. The red lines show universal negative divergence across all indicators so price shot up on fumes and does not have anymore gusto behind it. Note the MACD line sneaking out with a higher high that creates some subtle strength and you see the further price highs last week, however, the MACD is neggie d over the multi-year time frame. Thus, the MACD may try to eek out a few more weeks of buoyancy but the long-term weakness should spank it at any time.

BKLN has violated the upper band so the middle band at 21.94, and rising, is on the table and the lower band at 20.91. Price is extended above its moving averages, and also exhibits characteristics of a blow-off top spiking above the rising wedge pattern, so a mean reversion lower is on the table. The ADX shows that the trend higher in 2018 was a very strong trend and real trend higher but alas, the Q4 2018 stock market crash spanked BKLN lower with the broad stock market. Interestingly, price then runs higher like a banshee in 2019 now at record highs, but the ADX is down at 28, only now trying to move higher to indicate the trend higher is strong; currently the big upside rally is NOT a strong trend higher.

The Aroon green line is pegged at the ceiling at one hundo with nowhere to go but down but as you see, that can go on for a while. The red line spiked higher after the Q4 2018 crash but has not yet created a negative cross (red circle) so watch for that in the coming months.

All of the above indications are bearish and yet folks are drinking Fed wine, singing songs and buying any asset with a heartbeat due to the world awash in liquidity. Every day is a party. The brown circle shows the two largest volume months, both big sell-downs during the Q4 2018 crash, since the inception of BKLN in 2011. Price will need to come down and show respect to this price range from 20.75 to 21.70. The large volume candlesticks must be tested and the bulls will have to buy it hard at that level in the future, otherwise, there would be further sadness ahead (if you are long).

All the folks that bot BKLN in this couple-week frenzy will regret it by springtime. That MACD line may try to squeeze out a bit more life but any long holder would be wise to use that price buoyancy to cash-out. It is early in the year and obviously tax considerations must be assessed, but this puppy will likely head lower through the year ahead not higher. By year-end, BKLN will likely sport a 20 or 21 handle which would be a drop of -5% to -15% this year. Humorously, the money managers recommending BKLN may want to find a good hiding place by the end of the year because the long holders will be clutching their lesser-valued BKLN shares in one hand and a pitchfork or torch in the other. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added Tuesday Morning, 1/14/20, at 8:09 AM EST: BKLN trades flat sitting at 22.86.