Trading strategies for August

The interest rate cut of FED and the announcement that USA will impose 10% tariff on USD 300bn worth of Chinese products has created shock waves in the global markets, including in the Vietnam stock market. So what strategies should investors use in coming times, especially in August?

Illustrative photo.

Illustrative photo.

It was unexpected that FED would only cut 0.25% rather than 0.5% in interest rate. The interest rate cut expectation is open for the next meeting. Furthermore, President Trump said that from September USA will impose 10% tariff on USD 300bn worth of Chinese products. With this announcement, the US-China trade war has been pushed to higher and more serious levels, and the global economy is expected to face many new challenges.

In Vietnam stock market, investors have been worried and disappointed as they do not understand why the stock market in a growth economy and a destination for foreign investments like Vietnam cannot break through the level of 1,000 points. Based on technical analysis, the level of 995-1,000 points is considered a strong resistance. Hence, VN-Index has to test this level several times before breaking through and heading to the level of 1,080-1,100 points.

Since August, Vietnam stock market has been in line with the corrections of the global stock markets. So what strategies should the investors use to push their capital and earn a profit? Should investors stand outside the market or catch the falling knife? Should investors accumulate stocks gradually or cut loose? Should investors follow the value investing method or trade along the trends of some stocks in sectors of industrial zone or rubber?

Firstly, we will find out the reasons for the current market movements, then will form suitable investment strategies.

Investors should be patient in August

There are always ups and downs in stock markets, including US stock market. The market cycles may last for some weeks, some months, or some years, even some decades. Vietnam stock market is the same. VN-Index has been up and down year on year and it is hard to do a specific market forecast. The only clear thing we see is the stock market is in the uptrend in the long term, given the expansion of the economy in both terms of quantity and quality.

In August, the market is expected to continue being negative, hence it is not good for stock trading activities but better for searching cheaper stocks which are being sold off by many investors in the bad sentiment market.

The value investing method, which suggests investors buying stocks that are trading below their asset value, is considered the best choice.

The key thing here is investors should ignore the noise of the market and focus on some specific stocks. August will be a good month for investors who are patient to find a good stock to invest in the long term.

Carefully screen stocks

Many investors have been trapped in the mistake when they try to forecast the walking steps of the market to do short term trade. These mistakes even happen with technical analysis experts. The other investment specialists and financial experts also have not got good investment results. So is there any opportunity for amateur investors?

The rule for investors when joining the market is doing stock screening by themselves rather than following other people to do short term speculation. Stock speculation has been considered a method for big investors, not small investors.

The only way to prevent a risk is choosing stock carefully before investing. We are not able to predict the movement of the stock market, but we are able to choose the stocks which qualify for strict investment standards. Only careful investments bring investors good sleep every night.

Don’t follow trend without understanding

The other mistake of investors is trying to invest in the stocks which have good news, and more information about new projects, revenue and profit growth, at a high price. If investors are interested in some stocks which are related to Viettel Group like VTP, VGI, CTR, they are easily impressed by the growth in the share price of these companies. The investments which follow this upward trend without understanding about the companies is a risky strategy. The entry timing may be right, but if we do not have a view about the value of the company and the exit timing is wrong, the investment is just a losing game.

Investors should choose good stocks which are not going up yet. Investors should find stocks that other huge investors in the market have not recognized. This will be good strategy as it helps investors buy some good stocks at cheaper price.

Dr. Le Duc Khanh, Market Strategy Director, PetroVietnam Securities Incorporated

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