After a relentless uptrend to “conquer” the highest level in 6 months, the stock market experienced a sharp decline in the last trading session of the week. The leading role of banking stocks helped VN-Index maintain its green color throughout the morning session, with a breakthrough of up to 13 points at one point.
However, a sudden wave of selling pressure after 2 PM quickly reversed VN-Index’s direction, causing it to drop points and closing at its lowest level. VN-Index closed the session on February 23 down 15.31 points (1.25%) to 1,212 points. Red dominated the market with 692 declining stocks, surpassing the number of gaining stocks.
Notably, market liquidity also surged with a trading volume nearly touching the 1.4 billion shares threshold. The trading value on HOSE reached over 30,000 billion VND (equivalent to nearly 1.2 billion USD), setting a new high in nearly 6 months, since the end of September 2023.
With high liquidity, is this a distribution or a selling off session?
Commenting on the market trend, Mr. Do Bao Ngoc – Deputy Director of Vietnam Construction Securities, believes that money has been rotating around stocks, especially bluechips, which has pushed VN-Index up rapidly recently. The expert said that “no market can keep rising” when the prolonged bullish trend will increase selling pressure and a downward correction is inevitable. Moreover, VN-Index has approached a strong resistance zone around 1,230-1,250 points, which also creates pressure on the overall market.
In addition, the market is heavily influenced by the adjustment pressure from banking stocks at the end of the session. However, Mr. Ngoc believes that this group of stocks does not have any negative information but is merely the usual profit-taking pressure after a good rise.
According to the observation of the expert, the market sharply corrected down after a long uptrend period with a sudden surge in liquidity, a sign of a short-term distribution session that occurred after a large market cycle. When there is a distribution signal, the possibility of VN-Index forming a short-term peak and having to undergo a certain correction afterward is high.
Regarding investment strategy, the expert believes that profitable investors should take the opportunity to take profits in the market’s recovery sessions. Short-term investors who do not currently own stocks should not be hasty to “buy on the dip,” but instead wait for the market to find a new balance point to deploy capital for a new uptrend.
“After the correction, the market must establish a new price base, a new balance zone, and accumulate around that zone. With the approach to the MA10 zone, I believe VN-Index is likely to retest the MA20 zone at 1,200 – 1,205 points in the coming sessions,” predicts Mr. Do Bao Ngoc.
