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Renewed Interest in Russia Could Pop This Fund 15%
In about six weeks, the world will train its eyes on Russia. More specifically, millions of television viewers around the globe will tune in to watch the sporting action during the two-week Sochi 2014 Winter Olympics.
The games will be a source of national pride for Russia, as it allows the country to show off its first-class winter sports facilities. Of course, the fact that the whole world will be watching the games has not been lost on those who want to make a politically violent statement.
Over the past several days, there have been a series of deadly terror attacks in Russia. The suicide bombing attacks are thought to be the work of an Islamic group (though no group has yet claimed responsibility for the attacks) intent on creating a sense of fear in the host nation prior to the big event. I suspect that given the Russian government's swift and aggressive historical response to terror, the games will go off without a hitch.
I also suspect that the high-profile exposure that Russia gets from the games will act as a bullish tailwind for stocks domiciled in the country. As traders, we can take advantage of this circumstance with the Market Vectors Russia ETF (NYSE: RSX).
This fund is passively managed, and pegged to the price and yield performance of the Market Vectors Russia Index, a market cap-weighted index holding the biggest publicly traded Russian stocks.
Although the companies held in this fund aren't exactly household names here at home, the upside potential in this energy-rich ETF is something that profit-hungry traders will be right at home with.
During the past six months, RSX has rewarded shareholders with gain of nearly 18%, but the road to get there hasn't been exactly steady. The chart below shows the volatility the fund has experienced in 2013.
Several big swings below and back above the 50-day and 200-day moving averages have made this fund a nervous trade. But most recently, RSX held support at the 200-day, and then breached support at the 50-day average on the upside.
Shares ended 2013 at $28.87, about 8% off the 52-week high just north of $31, which was made last January. As the Sochi 2014 Winter Olympics draw nearer, and if no more terror incidents occur, I suspect the investing world will gain a renewed appreciation for Russia and its societal advancements.
For those looking for a headline trade on big events, I think RSX at current levels is a good candidate.
Recommended Trade Setup:
-- Buy RSX at the market price
-- Set stop-loss at $26.45, approximately 8% below recent prices
-- Set initial price target at $33.06 for a potential 15% gain in three months