Russia ETF Near Oversold Territory After Fund Trades at 2009 Lowby
Fund's 14-day RSI near level some analysts flag as buy signal
Russia ETF gained 1.3% as Brent rebounded from a 2003-low
The Market Vectors Russia ETF, the largest exchange-traded fund tracking Russian stocks, is among the worst 20 performers among its peers of equal size this year. The good news is that one technical indicator is signaling that the rout may be running out of steam.
A 15 percent decline in the fund’s price through Friday pushed its 14-day relative strength index, a velocity measure used by technical analysts to determine whether an equity is oversold, below 30. Such a low RSI reading tend not to last very long, and that gauge crossing above 30 from below, as it did with the Russia ETF, is considered a bullish signal.
The RSI measure was 30.7 on Tuesday as the ETF rose from an almost seven-year low reached last week.
This month’s decline in the Russia ETF pushed it into oversold territory for the first time since August amid a global equity rout. Investors pulled $18.6 million from the $1.5-billion fund last week, the most in two months, according to data compiled by Bloomberg. Investors headed for the exit as the fund’s historical 15-day volatility, a measure of price swings, rose to a four-month high.
“We saw that oil plunged very fast over a short period of time, which led to a spike in volatility and consequently, pushed the Market Vectors Russia ETF into oversold territory,” Oleg Popov, a money manager at the Moscow-based April Capital, said by phone. “The extreme price swings showed signs of easing on Monday, and if this lasts, we will see volatility abate and fund’s relative strength index rise.”
The fund, with about 40 percent invested in energy shares, rose 1.3 percent to $12.55 on Monday, rebounding from a March 2009 low. Brent crude, the grade traders use to price the nation’s main export blend, rose 0.7 percent to $28.76 a barrel on the London-based ICE Futures Europe exchange, after falling to the lowest since 2003. Oil, Russia’s largest export that has a large influence on the direction of its financial markets, has plunged 23 percent so far this year.