The crisis in Ukraine lingers on—yet Russian stocks have quietly rallied to new multi-week highs.

After falling to as low as $23.00 in early August, the Market Vectors Russia ETF (RSX) closed Thursday at $24.61—a rally of 7%.

The reversal is driven by mounting evidence that Russian President Vladimir Putin has pushed the current conflict as far as he reasonably can amid mounting sanctions and battlefield setbacks by pro-Russian rebels in Eastern Ukraine.

In a speech in Crimea on Thursday, Putin—against all expectations of more bravado—instead signaled an intent to step back from the brink.  At the same time, a high-profile rebel leader unexpectedly resigned his position as defense minister of the Donetsk People’s Republic in a further sign that the rebel cause is losing steam.

So, What Happens Now?

My best guess is that Russia slowly continues to remove itself from Ukraine without ever admitting guilt and that, over the course of 4-6 months, Western sanctions against Russia are quietly dropped.  Damage will have been done to the Russian economy, which will probably fall into technical recession.  But the worst of the fallout will have passed before the end of the fourth quarter.

Where Does This Leave Russian Stocks?

Russian stocks remain the absolute cheapest in the world after Greek stocks at 6 times trailing earnings.  Western sanctions will have an effect on earnings this year—this much is a given.  But the West—and particularly Western energy companies such as BP (BP) and ExxonMobil (XOM) simply have too much to lose from abandoning Russia altogether.  
Russian stocks will continue to be volatile based on the ebb and flow of events in Ukraine.  But the worst would appear to be behind us.

The Trade

Buy shares of the Market Vectors Russia ETF.  Plan to hold for 6-12 months for what I expect to be a quick 50%-100% return.  Use a 20% trailing stop as risk management.

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Charles Lewis Sizemore, CFA, is the editor of Macro Trend Investor and chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays.