NSL will be added as an Active Long Trade here around current levels. NSL is a closed-end fund currently yielding 6.98% & selling at a discount of 4.86% to the funds NAV (net asset value or market value of the combined holdings). Similar to the closed-end municipal bond fund trade ideas posted yesterday, NSL looks to offer an good risk-to-reward profile based on both the fundamental factors listed above as well as a potentially bullish chart pattern as prices have recently fallen to support while working their way down within a bullish falling wedge pattern, complete with positive divergences in place on the MACD & RSI.
Like many of those muni closed-end funds managed by Nuveen, NSL also incorporates the use of leverage to enhance the performance of this fund and as most of us know, leverage can work for or against a position or portfolio. However, unlike the municipal bond funds which hold a basket of fixed-rate securities (muni bonds), NSL invests in a basket of adjustable rate senior loans (at least 80% of which are must be secured, with no more than 20% not secured).
My preferred scenario at this time would be a move higher to at least the top of the pattern (upper-most downtrend line) and possibly a breakout from there (after a pullback or consolidation). However, if prices move below the S1 (support 1) line, NSL might continue to move lower within the pattern, possibly as low as S2, before breaking out. Therefore, NSL will be added as an active long trade here with a suggested stop on a close below S1 and the profit target(s) TBD. This will be considered a long-term trade & will be included in the new “Growth & Income Trades” category which focuses on trades that are expected to generate above average yields in addition to capital appreciation. Additional information on NSL can be found here: NSL Fact Sheet & Overview.