Is Vietnam the Next Peru?

01/04/2011 10:00 am EST

Focus: ETFS

Thomas Aspray

, Professional Trader & Analyst

Click to Enlarge

Chart Analysis: Though the S&P 500 had a decent 12.8% gain for 2010, many of the smaller global markets did considerably better. One example is the previously discussed iShares MSCI All Peru Capped Index Fund (EPU), which was up over 35%. As the world’s stock markets have opened the New Year with impressive gains, there are quite a few positive-looking charts. The Market Vectors Vietnam ETF (VNM) looks especially interesting as it gapped higher and closed strongly on Monday. VNM had moved through resistance in the $26 area in early December and was retesting the breakout level last week. Since late 2009, VNM has been in a much broader trading range with resistance at $30.30 (line a) and support in the $21.40 area (line b). The volume did pick up in December, supporting the 33% gain from the November lows. The daily and weekly on-balance volume (OBV) analysis is positive.

What It Means: Monday’s strong surge from the midpoint of the recent trading range increases the odds that VNM will be able to eventually move through the resistance at $30.30. The width of the trading range is $30.30-$21.40, or $8.90, so the upside target from such a breakout is in the $39.00-$40.00 area. A violation of support at $25.35 would be negative.

How to Profit: Given Monday’s rally, finding a good risk/reward entry in VNM is now more difficult. Clearly, VNM is quite volatile and is only suitable for the high-risk portion of one’s portfolio. Look to go long at $27.18 or better with a stop at $25.23, or a risk of 7.2%. Once VNM is above $30.50, move the stop to point b on the above chart.

Tom Aspray, professional trader and analyst, serves as senior editor for The views expressed here are his own.

Related Articles on ETFS

Keyword Image
Three Ways to Play Real Estate
04/08/2019 5:00 am EST

The real estate sector emerged near the top of our internal Sector Scorecard, signaling this group h...