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.