Russian Support

Like many of the emerging market countries, especially those dependent for a large part of their economy on energy, the Russian stock market has been taken out to the woodshed. Since 2011, their market has lost more than 60% using the RSX ETF proxy. As you can see, after gapping down in August of 2011, price consolidated sideways for 3 years before its next leg down below support in October of last year. Since then price bottomed finding support in the 14 area, bounced higher retesting the 2011-2014 support area (~20) and quickly reversed, falling right back to where it sits today around 14. Today support exists at 14 and resistance at 20, this is a good example of a trading range. Momentum continues to be weak and within the bearish zone.

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What has my attention here is the (blue) bearish head and shoulders continuation pattern that has developed during this consolidation. I do have to confess the pattern is not quite as symmetrically ideal as I would like as the right shoulder is taking more time to develop than the left did. In addition to those expecting price to bounce here off support rather than continue down, the red 200 day moving average has flattened from a decline which is a slight positive. Further delay in breaking below the neckline will invalidate the pattern so it needs get going here real soon. While I cannot know every readers investment timeline or risk, anyone still owning RSX should seriously consider whether the 25% downside target potential on a break below the neckline is something they feel comfortable with and want to endure.