Here’s how I’m trading Russia (RSX). (April 11, 2018)
RSX
Just a quick video here on Russia ETF RSX ( NYSEARCA: RSX ). I mentioned in today’s pre-market note that I bought some RSX ( NYSEARCA: RSX ) before the open, which I typically don’t do. I am not a real Badlands guy where I like to trade in the after market or the pre-market. But in this case I felt like it was warranted.
The reason is: Could you factor in any more bad news for Russia when it gets to their economy, all the Syrian stuff, Trump’s tweets and this and that and the other thing and shall we just say the law enforcement action? Basically because we don’t like it when they kill people. It is a weird thing, I guess we are just a little crazy about that; we are not real big fans of murder here. They have had a lot of things happen that has pushed their stock down.
But at some point you have to do this: You have to look at these three standard deviation bands, these are the red ones. The stock, it is kind of like a rule of statistics; it is an inviolable law that you are not supposed to be outside the red band. Those are three standard deviations; it is like 99.9 percent of all closes are supposed to be inside these bands. So you can see the only time this has broken the law was on Monday; a big move down.
Then yesterday though, we got a little reversal and that was fine. So I was looking at this at the end of the day yesterday thinking, you know that trade is probably gone. Because at this point, if we just go back here, that trade is probably gone because the stock has already reversed. It wasn’t a big whopping reversal; it didn’t really move up here, it just kind of corrected the prior days move. But it is still trading down here, just not a lot of energy one way or another. So I checked it out but my sense was that maybe this would get a little bit more move to the upside. I didn’t have too high of hopes for it; it just didn’t feel like it would happen.
So then this morning I get to my desk and I see that this stock is trading down. This is where it closed on Tuesday. Boom! So it is down here on Wednesday; I am thinking, all right, I’m in, I am buying this stock because I could see what was happening. We will fast forward here, I had a nice move all day long. I am still long, this doesn’t bother me because I like the way this pattern worked.
When you see this stock break the rules, it broke the law, standard deviation, three of them down. This thing is way below it and then it rallies just like it is supposed to. It got a little slap on the wrist and then it gaps down in the morning and it is back below this lower band. That is, frankly, it is a very, very clear trade. I wanted to sell some puts on this. I wanted to do an option trade on it just to maybe augment the stock trade but I didn’t really see anything that I felt like doing. Also, frankly, at a $20.00 stock, you can buy a lot of shares. A lot of times on stocks this low it is just best to buy the stock even if you have to go on margin; it works.
So you can see that post-market here (I am doing this in the evening) that the stock is down a little bit but not enough to worry. So at this point what you do is, you hang onto the shares here. Expect a little more upward momentum because you are always going to get some people that are kind of late to the party and they still want to get onboard. Also, it is looking like maybe we are not going to war, at least not on Thursday. So I expect this to move up a little bit. If it does I plan on selling it at about $21.00. So I bought it this morning at 19.80; if I can sell it tomorrow at $21.00 that is a nice 6.5 percent return in a couple days; I’ll take it.
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