Pullback On NGSE Amidst Profit-taking, As Investors Position For Earnings Season

Pullback On NGSE Amidst Profit-taking, As Investors Position For Earnings Season


Post Views: 94 Market Update for January 14 As expected, trading activities on the Nigerian Stock Exchange (NSE) on Tuesday succumbed to ‘sell’ pressu...

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Market Update for January 14
As expected, trading activities on the Nigerian Stock Exchange (NSE) on Tuesday succumbed to ‘sell’ pressure and profit-taking, halting the eleventh successive session of bull-run, with the All-Share index pulling back to close lower on a huge traded volume.
The long-overdue profit taking is part of every stock market. Despite the seeming change in the market’s direction, it still has strong potentials to rebound in no distant time due to the persisting low valuation and increasing liquidity in the system.
As mentioned in our market update for Monday, profit-taking is underway.
We, therefore, advise cautious trading now, especially as players who missed out in the recent rally should start identifying their entry points, using technical analysis tools for support and resistance level in their choice of equities. Those yet to exit their old positions are advised to tread cautiously, because many traders and investors know when to buy but find it difficult to exit due to a lack of investment goals or objectives at the point they are taking the position.
As I discussed on mastering the earnings and dividend game for 2020 profitable trading during our invest 2020 summit in Lagos, at the start of each quarterly earnings season, we publish expected earnings release date based on historical data of companies, the most volatile on their earnings reaction days.
These are stocks that experience the biggest average percentage change between the first and third trading sessions, following the release of their quarterly or full-year earnings reports. To maximize profit while trading with the earnings release date, investors must position two to three weeks before the company’s release date if they must take advantage, buying low and selling high, when the market reacts positively to the results when it finally hit the market.
Meanwhile, it was a volatile and mixed session on Tuesday as trading started on the upside before pulling back mid-morning to oscillate between midday and afternoon on profit-taking. This pulled the composite index to an intraday low of 29,037.12bps from its high of 29,812.97bps, before finally closing the day lower at 29, 283.15bps, below its opening figure of 29,633.58bps.
Tuesday’s market technicals were negative and mixed, with volume traded higher than the previous session, in the midst of negative market breadth and mixed sentiment as revealed by Investdata’s Sentiment Report of 32% buy position and 68% sell volume.
The day’s total transaction volume index stood at 2.14, just as the momentum behind the day’s performance was strong but looking down as Money Flow Index reads 78.14points, from the previous 83.62bps. This is an indication that funds left some stocks and the general market.

Index and Market Caps
At the end of Tuesday’s trading, the benchmark NSEASI shed 350.43bps, closing at 29,283.15bps from the 29,633.58bps, representing a 1.18% decline, just as market capitalization lost N180.78bn to closing at N15.11tr from its opening value of N15.29tr, representing a 1.18% depreciation in value.
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The session’s downturn was impacted by profit taking in stocks like Dangote Cement, MTN Nigeria, NB, Zenith Bank, UBA, Access Bank and UACN, among others, impacting negatively on the NSE’s Year-to-Date gain, reducing it to 9.09%. Market capitalization YTD slipped to N2.15tr, representing a 16.58% growth over the year’s opening value.

Bearish Sector Indices
All the sectoral performance indexes closed in the red, just as market breadth was negative with decliners outpacing advancers in the ratio of 23:13, while market activities were mixed, while volume traded was up 98.45% to 666.78m shares, from the previous day 348.24m units. The value of transactions dropped by 35.28% to N6.52bn from N8.55bn on Monday, even as volume was boosted by trades in Union Diagnostic, Zenith Bank, UBA, Access Bank and FBNH.
The best-performing stocks during the day were Beta Glass and C/I Leasing, which gained 9.67% and 8.89% respectively to close at N59.00 and N7.35 per share, on market forces. On the flip side, Tourist company and NEM Insurance lost 10% and 9.69% respectively, closing at N3.15 and N2.05 on selloffs and profit-taking.

Market Outlook
We expect mixed performance and profit-taking to persist, just as position-taking on pullbacks taking advantage of price correction, ahead of the release of the nation’s December inflation data and full-year financial reports. This is also against the backdrop of the prevailing low-interest rate in the money market.
Also, investors and traders are positioning in anticipation of the 2019 full-year earnings reports, amidst changing sentiments in the hope of improved liquidity and positive economic indices which had pushed the market out of the bearish zone.
We see Investors focusing on the upcoming full-year earnings season, targeting companies with strong potential to grow their dividend on the strength of their earnings capacity.
Again, the current undervalued state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound and dividend-paying stocks for possible capital appreciation in the New Year. This was noted in the 10 golden stocks and trading ideas for 2020, as discussed extensively during the Investdata 2020 Traders & Investors Summit.
Also, traders and investors need to change their strategies, because of the NSE’s pricing methodology, CBN directives and its impact on the economy in the nearest future.
Meanwhile, the Investdata team welcomes you to a bullish 2020. The home study packs of Invest 2020 Opportunities and Trade Ideas Summit containing the 10 Golden Stocks for 2020 are available. To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085, 08032055467, 08111811223 now.

Ambrose Omordion
CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467