Long
Has Russia Bottomed Out?
Russia has been a hot bed of geopolitical issues through out 2014. However, the Russian stock market has bounced by over 17% year to date(as measured by the RSX etf).
Fundamentals
Since Russia entered into a cease fire with Ukraine the sails have been in stock markets wind. Even with the major positive movement the Russian ETF, RSX is still at a 5 year low. The Russian economy depends heavily on oil and gas production, which accounts for 70% of Russian exports and approx 50% of the budget. Since entering into a recession in early 2014, clearly its economy has been hit hard by lower oil prices .
As Oil companies, adjust for lower oil prices, but reducing exploration and reducing rigg counts, you can clearly make a case for higher Oil, later on in the year. Also if there are any, reduction in OPEC supply this will be good for the Russian economy as well, which will directly translate to good earning for Russian oil companies.
Russia has been very volatile lately and has experienced a downgrade, however its not likely that there will be a debt default situation since Russia's reserves can cover them for at least 2 years, the debt to GDP is lower then most other countries and its depressed currency will help to increase exports on the open market. All of these factors have the potential to give the economy a bit of boost and deliver it out of recession.
The one dark cloud, is the continued sanctions that are being imposed by The US and other European countries, which have been extended for another year.
Technicals
After reviewing the monthly chart of RSX, its appears that its may have bottomed. The RSI indicator, has moved above over sold territory. The last time the RSI indicator was in oversold territory was during the 2008 market crash and it staged a massive rally over the last 5 years.
After reviewing the Fibonacci retracement levels the stock is just below the 23.6% level. Going at its current trajectory if it breaks that level it will indicate that its being a new uptrend.
The Trade
Currently, RSX is trading at $17.38. I see this as a long term investment, but I believe there is plenty of room to trade it.
Trading Targets ( 1 - 6 months)
Investment Targets ( 1 - 5 years)
Fundamentals
Since Russia entered into a cease fire with Ukraine the sails have been in stock markets wind. Even with the major positive movement the Russian ETF, RSX is still at a 5 year low. The Russian economy depends heavily on oil and gas production, which accounts for 70% of Russian exports and approx 50% of the budget. Since entering into a recession in early 2014, clearly its economy has been hit hard by lower oil prices .
As Oil companies, adjust for lower oil prices, but reducing exploration and reducing rigg counts, you can clearly make a case for higher Oil, later on in the year. Also if there are any, reduction in OPEC supply this will be good for the Russian economy as well, which will directly translate to good earning for Russian oil companies.
Russia has been very volatile lately and has experienced a downgrade, however its not likely that there will be a debt default situation since Russia's reserves can cover them for at least 2 years, the debt to GDP is lower then most other countries and its depressed currency will help to increase exports on the open market. All of these factors have the potential to give the economy a bit of boost and deliver it out of recession.
The one dark cloud, is the continued sanctions that are being imposed by The US and other European countries, which have been extended for another year.
Technicals
After reviewing the monthly chart of RSX, its appears that its may have bottomed. The RSI indicator, has moved above over sold territory. The last time the RSI indicator was in oversold territory was during the 2008 market crash and it staged a massive rally over the last 5 years.
After reviewing the Fibonacci retracement levels the stock is just below the 23.6% level. Going at its current trajectory if it breaks that level it will indicate that its being a new uptrend.
The Trade
Currently, RSX is trading at $17.38. I see this as a long term investment, but I believe there is plenty of room to trade it.
Trading Targets ( 1 - 6 months)
- Short Term profit target is: $21.35(23.6% Fib Level)
Short Term Stop Loss: 16.86 (3% Stop)
Investment Targets ( 1 - 5 years)
- Long Term profit target: $40.16(61.8% Fib Level)
Long Term Stop Loss: $14.06( Previous Low)
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