After powerful rallies in 2016, Russian stocks are consolidating and could be getting ready to take off again. These consolidations are relatively fresh, only in play for a couple of months, so it could take another month or two before we see a big move, but these are two ETFs to keep on the radar.
The VanEck Vectors Russia ETF (RSX) bottomed at $11.81 in early 2016, before having an explosive run to a 2017 high of $22.19. The price has retreated off that January high but has stabilized above primary support which is below $19.50. That support area is an old resistance area from mid-2016.
Since March the price has formed a small triangle, and a larger one extending back to November. That triangle is indicating support near $19.80. While the price could move sideways a while longer, if it starts moving above $21.40, that is a bullish signal. Given the uptrend, that signal would indicate the next rally is commencing. Estimated targets, based on the size of the small and large triangles, are $24.40 and $25.50, respectively. A decline below $19.70 breaks the triangle to the downside, but isn’t a major cause for concern, as there is support all the way down to $18. Buying the ETF in the $19.50 to $18.50 region is an option to consider.
The VanEck Vectors Russia Small-Cap ETF (RSXJ) had an even stronger run, bottoming at $15.97 in early 2016 and rallying to a 2017 high of $42.10, a 163% move. After dropping in February and March, the ETF bounced aggressively and is now moving in a triangle pattern as well. This triangle is just starting to form, with only two swing high and swing low points to connect. Many traders like to see at least three contact points (on each trendline) before considering it a valid triangle. Therefore, some patience may need to be exercised in this one, letting the price oscillate around for the next month or so. That said if the price starts rallying above $41.50 that is bullish, as it breaks the triangle. Based on the size of the current triangle (and that size may change over the next month or so), an upside breakout provides a target of $47.50. Given the very strong rally, a downside breakout below $39 can be used as a potential exit point on longs, but short trades are best avoided.
The Bottom Line
Russian stocks have been on a tear, but have slowed recently, moving into triangle patterns. Given the uptrend, probabilities slightly favor an upside breakout. Traders can bargain-hunt on declines toward support, or await an upside breakout. In a long-term context, these consolidations are quite immature, which means the price could continue to oscillate sideways (potentially triggering false breakouts from the triangles) over the next couple months. That said, there has been enough momentum here over the last 18 months to consider a trade, or at least keep them on a watchlist.
Disclosure: The author doesn’t have positions in the ETFs mentioned.