It might appear to be a bad time to invest in Russian stocks. After all, aktsii have sold off since the top of the year. The VanEck Vectors Russia ETF (NYSE Arca: RSX) and the SPDR S&P Russia ETF (NYSE Arca: RBL) are both 5 percent lower than their New Year’s Eve prices.

But you can’t write off Russian equities on that basis alone. You have to know how Russian equities got to their present state. Look at the recent price trajectory for the more liquid RSX fund.

VanEck RSX - Poised For a Breakout

(Click on image to enlarge)

What you see in the RSX chart – and on the graph for RBL as well – is a symmetrical triangle or wedge formation, characterized by a series of lower highs and higher lows. Simply put, over the past four months, trading’s been compressed into an ever-tightening range. Think of a coiled spring. You can squeeze the spring into a tighter coil only so far. And, if you relent on the pressure, the spring will shoot out to its “normal” height. That’s what’s being set up now – a breakout. The question that remains is this: a breakout to the upside or the downside?

More important, is a breakout is even worth trading?

With patterns like these, trades should be taken whenever prices trade above the upper trendline or below the lower trendline of the wedge. The wedge has a height of $2.74, prescribed by RSX’s late January high and its March low. That’s more than 10 percent of the ETF’s current price. We’re now in the optimal time frame for a breakout from this pattern and the momentum is downward, making a bearish breakout more likely. That probability, however, diminishes substantially if we don’t soon see a breach below the wedge’s lower trendline.

And if we do? We’re likely to see selloffs to the $17-$18 level as shown by the red dashed lines in the chart above. From today’s level, that’s a 10 to 15 percent decline.

For those investors who can’t short the ETF, an alternative play is a long position in the Direxion Daily Russian Bear 3x Shares (NYSE Arca: RUSS), a triple-leveraged short exposure (-300 percent) to the MVIS Russia Index, the same benchmark tracked by RSX. A fund with that much leverage can’t be held for the long term and, as such, isn’t suitable for many investors.

Over the past three years, RUSS has earned a -2.44 beta against RSX. On that basis, a return of 24 to 36 percent might be expected if RSX’s downside targets are reached in short order.

That’s no guarantee, of course. There never is. But if you’ve got a speculative streak, udachi!