Russia Archives | Opportunity Identified

March 17, 2016 | Posted by David Zarling, Head of Investment Research

Mother Russia!

While most are watching U.S. equities rip higher, we’re continuing to see strength from emerging markets. Previously, we highlighted the breakout taking place in Brazil. Up 13% since we released that research, Brazil hasn’t disappointed. Though nothing is guaranteed, and price knows more than we do, we are seeing a similar development out of Russia.

Using a weekly chart of RSX (an ETF that mirrors the Russian Trading System Index), you’ll see exactly what we’re talking about.

Russia has broken out of steepening downtrend that dates back to 2011. With a a 67% drawdown since then, Russian equities have been subject to significant discounting. We’re not interested in buying stocks that are in a downtrend. But when the supply and demand dynamic changes, and buyers step into the marketplace, we sit up and take notice. In late 2014, and recently again earlier this year, buyers stepped in near the 12.00 level. More importantly, there was enough buying demand to push RSX through the downtrend line (in green), signaling a potential change in trend.

We can take advantage of this opportunity by making sure we identify the risk involved with this trade. We should never enter a trade without understanding potential risk versus potential reward. Technical analysis allows us to do just that. Here’s a daily chart of RSX:

The breakout is clear. There is more demand than supply, causing prices to breakout. We like that. We also see a logical level (16.00) where buyers should step in if there is any pull back in prices. And if they don’t, we’re out of the trade. It’s as simple as that. We’re long RSX above 16.00. Below 16.00, we’re out. Bila ne bila.

Disclaimer: Nothing in this article should be construed as investment advice or a solicitation to buy or sell a security. You invest based on your own decisions.

October 20, 2014 | Posted by David Zarling, Head of Investment Research

Russia (RSX) Reaches Downside Targets

Back on June 23rd, we identified the opportunity to short Russian equities with very little risk and very good reward. It paid off. Russian equities (using RSX as our proxy in our post) sold off after hitting (and failing to breakout from) a downward trend line that dates back to 2007. This downward trend line, along with a common Fibonacci retracement ratio, provided stiff resistance and a well defined risk/reward scenario. -19.6% later, we’ve reached our 2nd target of 21.00. Accordingly, we’ve closed our short trade and will re-evaluate Russian equities for further weakness. We would consider going long Russia here, but the breakdown in oil has us investigating this thesis more thoroughly. We also could consider re-entering a short position in Russia if there is more downside follow through past 21.00. Quite frankly, if that latter scenario unfolds, there may be bigger sell-offs happening across many major financial markets.

This trade is specifically why 360 Investment Research uses technical analysis. We can identify robust risk/reward opportunities in any market across the entire investment universe.

June 23, 2014 | Posted by David Zarling, Head of Investment Research

Shorting Russia

When the Ukrainian/Crimean crisis first evolved, Russian equities sold off hard. We like to use ETFs to capture full sectors, markets, or countries. The ETF for Russia is RSX. Since the March panic sell off, RSX has rebounded to a trendline that has provided resistance for the past 7 years. This meeting with the upper trendline coincides with a Fibonacciretracement level of 61.8%. This, along with confirmation of several momentum indicators, make shorting RSX a low risk / high reward trade. Stop-loss = check. Targets = check. Our risk/reward profile is well defined. We like that. A break above the upper trendline would be bullish for Russia (RSX) and would change our stance. We’re not concerned with being right. We’re concerned about being on the right side of the trade.