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Vietnam stocks set for rebound in January: technical analysis   2009-12-17 - Bloomberg

Vietnam’s benchmark index, the world’s worst performer this month after falling 15 percent, may recoup its losses in January after reaching its support level, according to Kim Eng Securities Vietnam Joint-Stock Co.



The VN Index has formed a so-called head-and-shoulders pattern since June, which ended at the 430 to 450 range and created a support level, said Nguyen Duy Khoa, head of the brokerage business at Kim Eng Securities Vietnam, a unit of Singapore-based Kim Eng Holdings Ltd. The index may rally next month until it reaches resistance of 490 to 500, he said.

The VN Index “is now at a support level to bounce back,” Khoa said in a phone interview Wednesday. “This level can also be considered a temporary bottom for the index.”

The measure tracking 190 companies listed on the Ho Chi Minh City Stock Exchange fell 3.3 percent to 427.46 as of 9:32 a.m. local time, the lowest since July 22. Losses this month have trimmed the gauge’s 2009 gains to 40 percent as the government, struggling to control accelerating inflation and a widening trade deficit, raised its key interest rate to slow bank lending.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

A rising head-and-shoulders comprises three consecutive peaks on a chart, with the neckline serving as the base of the pattern. Resistance refers to the upper boundary of a trading range, where sell orders may be clustered, while support is where there may be buy orders.

A rebound in volume may also signal a recovery for Vietnam’s stocks, Khoa said. Daily trading averaged 39 million shares this month, according to data compiled by Bloomberg.

“Historical trading volume data will also show us if the uptrend is established,” the analyst said. “If the volume reaches 42 to 45 million shares a day, it’s a positive signal for the market as it exceeded an average level of daily trading volume since June.”

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