Good Morning, Vietnam

Good Morning, Vietnam

July 5, 2017 Off By Chuck

After peaking in mid-2014, the Vietnam stock market tracking ETF, VNM, went into a free-fall and declined more than 40%. It eventually bottomed in January of 2016. For the next 6 months it pushed higher climbing 20%, breaking above both the down trend resistance line and the 200 day moving average.  As with most bottoming patterns, the first push higher eventually runs out of gas and the sellers take control and retest the prior lows, which is exactly what occurred at the beginning of this year.

As you can see the chart has taken on a much more constructive look as price is once again above the (red) 200 day moving average which is now pointing up. In addition, RSI momentum is now in the bullish zone and, most importantly, price has broken above the prior highs. Hopefully the “W” bottoming pattern is easily recognizable because a confirmed breakout has a first target up around $18, almost 20% higher.

Its always important to keep in mind investing in small, emerging or frontier countries such as Vietnam equities is volatile and illiquid. As such, it adds greater risks than those you would normally experience in the more developed country markets. Some investors prefer to manage these risks by avoiding them completely.  Another solution, which is my preference as it allows you to diversify, is to ratchet down the size of your investment which in turn brings the risks down commensurately.