A 5:1 reward potential

Flying back to US today and jotting down some thoughts on the plane.
I have become very bearish on the long term US Treasury bonds for a few months now and have traded with TBT to bet against it. Looks like it is a good trade so far and likely it can also be a long term trade. The Treasury bonds have enjoyed a gigantic bull run for over 35 years but it appears to have ended by now. When Treasury goes into a trend, it usually will last for decades. So the long term trend for it is quite bleak. We are likely seeing the very beginning of a gigantic bear run for Treasury that may also run for 2-3 decades. Staying with this mega trend may make you a lot of money! But in the very near term, I think we may see a great trading opportunity to bet for a fierce rebound of Treasury.

Since Trump won the presidential election, the stock market suddenly becomes wildly bullish but the Treasury bonds has got hammered to death. In less than 2 weeks, the long term bonds lost 15% that probably has never occurred before in such kind of violent move. TLT, the ETF for 20 years bonds, has been knocked down so much that it is extremely far away from its 50 DMA, a $10 difference. I don’t recall having ever seen this before and when such an extreme occurs, the opposite move may likely follow. At around $120 at the moment, it is sitting on a strong support and next major move is probably a return to mean towards its 50 DMA. Betting for a bounce of TLT has a huge risk reward ratio maybe at 5:1. Of course, there is no guarantee and don’t overplay with it!