Turkish markets were burned on Friday.
The TUR Turkey ETF, which tracks $283 million in Turkish stocks, tanked 14 percent in its second-worst daily performance in its history. The Turkish lira plunged in its largest drop since Turkey's economic crisis 17 years ago.
"The situation has gotten pretty dire, to say the least," said Mark Newton, technical analyst at Newton Advisors, to CNBC's "Trading Nation" on Friday. "The TUR has been in literal freefall over the last few months."
The TUR ETF has been cut in half since its year-to-date highs in January. It has fallen 51 percent so far in 2018, its worst annual performance ever. August is on track to be its seventh straight month in the red.
Its steep drop may have set up a near-term bottom that leads to a bounce, says Newton.
"It has limited downside. It's nearing the lows that were seen back in 2008, 2009," he said. "From a very short-term trading perspective you could say a capitulation-type low is potentially at hand, but really I wouldn't touch this with a 10-foot pole for anything more than three to five days."
Newton says an aggressive investor could ride a bounce back up to around $25 to $27 before selling out their position. The low end of that range represents a 17 percent rally from current levels.
"But, for intermediate-term investors the downtrend is very well established and, if anything, you want to see much more signs of stabilization before you get involved," he added.
Gina Sanchez, CEO of Chantico Global, agrees that the set-up on Turkish markets looks ugly.
"It's hard to find things to like. The fact is that this situation has been breaking down for years," said Sanchez. "Clearly a lot of folks have been shorting this for the last couple of months. You can see that investor sentiment is negative."
The TUR ETF has short interest at 38 percent of its float. Short interest measures the size and number of open shorted positions, investors expecting a decline.
Turkey's markets and the Turkish lira collapsed earlier Friday after President Donald Trump authorized tariffs double the current levies on aluminum and steel from the country.
Tensions between the U.S. and Turkey have escalated over a number of disagreements, most notably in failed negotiations over the release of an American pastor who had been detained since 2016. The U.S. had already sanctioned two ministers of the Turkish government earlier in August.