Turkey has been under enormous financial press lately. The political risk has spread to financial risk with Turkish assets imploding, and risk premium exploding.

The government has during the last days come up with various measures to try to stabilize the Turkish lira, TRY. If these are actually light capital controls or not, we leave for the longer-term investor to decide upon, buy whenever sentiment become one way bearish, we find it interesting to look for contrarian capitulation trades.

Below is the TRY, actually showing signs of “life”. Watch the huge 6 level.

Turkey 5-year CDS has blown up and is reaching highs from August last year.

This is not a fundamental long-term call, but Turkish assets tend to have violent bounces, if you catch them right. Below chart shows the main Turkey ETF, TUR US. Note we are back to the same levels we traded at last time people started believing Turkey was never going to bounce again.

20 is a huge level, and we would be starting to look at the first long trades spread out over a few days. Stop losses are always in place, but given the huge volatility of this index, the long bounce trades must be spread over time, as well as the possible stop loss later.

Source, Charts by Bloomberg