It was only a few days ago we suggested the Turkey sentiment was way too bearish. Out inboxes were filled with bearish Turkey notes. We wrote;
“whenever sentiment become one way bearish, we find it interesting to look for contrarian capitulation trades.”
Our “simple” logic was based primarily on the negative sentiment as well as the huge support levels the Turkey ETF, TUR US, was trading at. We reminded how this asset can trade on the way up as well:
“This is not a fundamental long-term call, but Turkish assets tend to have violent bounces, if you catch them right”.
The TUR US is +11% from lows we saw a few days ago, not bad for a bounce trade.
The problem with these types of aggressive bounces is how long do you ride it. We prefer placing stop profits in a dynamic way, i.e. the more the ETF climbs, the higher up you move your take profit level. Our short term potential would be the 50 day average, but just in case, we would apply the dynamic stop profit logic to this well timed bounce call.
Source, charts by Bloomberg