NSE Consumer Goods Index Set To Breakout 4-Year Resistance Level

NSE Consumer Goods Index Set To Breakout 4-Year Resistance Level

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Post Views: 93 Chart: NSE Consumer Goods Monthly Chart 2013-2018 This sectorial index is a component of NSE benchmark Index that measure performance o...

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Chart: NSE Consumer Goods Monthly Chart 2013-2018

This sectorial index is a component of NSE benchmark Index that measure performance of consumer goods equities with mixed financial year end of March, June, September and December.
The index action shows that the sector is in strong recovery mode from a three-year pullback as a result of the unimpressive numbers, political tension in 2014 pre-election, insecurity in Nigeria’s troubled North-East region as a result of the Boko Haram insurgency which significantly affected sales, uncertainty over the 2015 general election, unstable exchange rate regime, made worse by the unclear policy direction of the Federal Government that came to power on May 29, 2015, beginning with the delay in constituting a cabinet until after six months.
It was only after the nation had sank deep in recession for a full year in 2016 that the government launched its Economic Recovery and Growth Plan (ERGP) in February last year. One of the hardest hit was the consumer goods sector, owing to the shortage in foreign exchange which threw many manufacturing companies in red due to high exchange rate in a contracting economy where productivity was low, inflation was on the rise, amidst a weakening purchasing power among the people.
But the ongoing strong recovery in the economy and sector fundamentals reflected in the numbers emanating from stocks in the industry and their share price performance on the exchange in the last one year. The trading range and momentum trending ability predicts that the upside will continue despite the expected slowdown as a result of profit booking by traders, which provide another opportunity for market players to get on board.
The low, medium and high cap stocks in this sector have enjoyed positive sentiments and strong buying pressure due to improved earnings power of the companies which reveal a likelihood of higher payout at the end of the day, especially for the companies having December and March as their financial year-end.
A multi-year trend decline that started from November 2013, attaining a high of 1,124.81 with different attempts to rebound but failed until it found support in the lows of 560.83 in February 2017, before a rebound that was sustained for six months on improving earnings from the sector. This was before the pullback on profit taking in September to November and reversed in December to form an ascending triangle chart pattern that supported continuation of rally that is about to breakout the next resistance level at 1,027.86 from the current position of 990.47. As it had turned higher this year during the first trading week of 2018.
The sector rallied with the general market in 2017 with bullish index action into the new year forming ascending triangle pattern which supports complete breakout as the uptrend continue ahead of the earnings season. The current third wave into range resistance with bullish index structure predicts consolidation or pullback due to profit taking any moment from now, which will be followed by a strong breakout. There is still upside potential for equities in this sector especially the low priced ones that their earnings are looking up.

Price Action of Stocks in this Index as Presented in the Charts Below.

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