Market Update for October 9
Midweek’s trading on the Nigerian Exchange closed negative, as market players continued to take profit and reposition their portfolio ahead of quarterly earnings and macroeconomic data inflow in the midst of higher rates in fixed income instruments and expected last quarter and end of the year seasonality.
Selloffs in blue chip companies and others pushed the composite NGX All-Share index lower on a low traded volume and negative market breadth. The strength or weakness of any market are the different dynamics of stock markets technically that require effective strategies to navigate and follow trends profitably.
The pullbacks and breadth contraction in the market provide buy opportunities for discerning investors and smart traders amid repositioning of portfolios along sectors and companies with potentials to release positive numbers on the strength of their earnings power continue ahead of the Q3 earnings reporting season. Also, early filers are expected to kick start the earnings season next week, just as focus are on the September Consumer Price Index reports from the National Bureau of Statistics. These numbers are likely to guide investing public decision ahead of CBN policy meeting in November.
Historically, and in technical analysis, trends or patterns repeat themselves. This last quarter of the year comes with seasonality and sentiment that makes it very important to market players across the globe. This is especially as retracement from strong support level of 96,684.90 basis points and 96,702.26bps after forming a bottoming tail and uptrend candles. This created the perfect setup for high probability swing trade to catch on ahead of earnings news that will impact prices.
Nigerian Breweries and others notified the NGX of their closed periods and board meeting dates to approve their scorecards this month. However, the low valuation and high dividend yield of some companies due to profit taking and pullbacks are creating opportunities for new entrants who understand the big picture and market dynamics at this season.
The NGX index’s action is still weak and trading below the T-line and 50-EMA, while above 50-SMA to indicates profit booking and pullbacks in the midst of changing market fundamentals and technicals. We note that the economic reforms of the government, measured by the outpouring of fiscal and monetary policies are yet to put the nation’s economy on the path of recovery, despite the seeming slowdown inflation and mixed macroeconomic data. There are also issues with the implementation style amid the oscillating oil production output even as the Naira continues to depreciate at a time that oil is trading above $79 per barrel at the international market.
Technically, the NGX is ranging, expecting a trigger to give direction, which state of corporate and economic numbers will determine. As these reports hits the market any moment from next week. Candlestick formation and momentum indicators had revealed strength returning to the market. As ADX inched down at 21.44, while RSI and Money Flow Index were down to read 48.94 and 46.62 points against the previous session 48.78 and 46.62 points respectively. Market players should watch this current trend and trade with caution in the face of funds leaving the market on mixed sentiment in some sectors and profit taking in others. Also, trading volume pattern continued to oscillates, suggesting buying interest and selloffs in the market amid players looking forward to earnings reports and policy direction of economic managers.
To navigate the rest of this quarter and beyond profitably using fundamental and technical analysis to run, join investdata live sessions at noon every Monday, Wednesday and Friday trading day “and also get investdata technical toolbox to play the current state of the market do suggest that discerning investors are gradually becoming greedy, while others are fearful, as seen in the recent range market. Despite the oscillating volume of transaction witnessed in recent time, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.
Oil prices at midweek dropped to continue its oscillation, as it trade at $76.58 per barrel in the midst of rising US inventory and geopolitical tension over supply shock in the wake of continued conflict in the middle east. Also, soft demand from China and outlook of further rate cut in the last Fed policy meeting for the year come November. The rising geopolitical uncertainties across many economies remains a threat to the global economy and energy consumption. This trend may likely continue for the rest of 2024, while the up and down movement continues to drive volatility, even as the raging war between Ukraine and Russia continues to influence global oil supply and demand.
Meanwhile, trading opened in the green before pulling back to oscillate for the rest of the session on profit taking and buying interest in some companies shares. This situation pushed the NGX’s index to an intra-day low of 97,323.51basis points from its highs of 97,899.50bps, before closing below its opening level at 97,487.14bps.
Market technicals for the session were negative and mixed with lower volume when compared to the previous session in the midst of breadth that favour the bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 45% buy position and 55% sell volume. The total transaction volume index stood at 0.55 points, just as impetus behind the day’s performance was relatively strong as Money Flow Index was fell to read 46.62pts, from the previous day’s 55.36pts, indicating that funds left the market.
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Index and Market Caps
The NGX All-Share Index at the end of the session shed 97.67 basis points closing at 97,487.14bps after opening at 97,584.81bps, representing a 0.10% drop. Market capitalization fell by N56.12bn, closing at N56.02tr from the previous day’s N56.08tr, representing a 0.10% value loss.
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Wednesday’s downturn was driven by profit taking and selloffs in FBNH, Oando, GTCO, UBA, Accesscorp, Cornerstone and Cutix among others. This expectedly had negative impact on Year-To-Date gain which slide to 30.39%, while Market capitalization was up to N10.95tr, representing 36.96% above its opening level for the year.
Bearish Sector Indices
Sectoral performance indexes were down save for NGX Consumer Goods that closed higher by 0.31%, while the NGX Banking led decliners after losing 0.67%, followed by Energy, Insurance and Industrial goods with 0.48%, 0.22% and 0.01% respectively.
Market breadth was negative as losers outnumbered gainers in the ratio of 37:14, while transactions in volume and value were down after investors exchanged 356.13 million shares worth N6.95bn. Volume was driven by trades in Fidelity Bank,UBA, SterlingNG, NB and Oando.
Lasaco and Julius Berger were the best performing stocks, gaining 10% and 9.33% respectively, closing at N2.53 and N164.00 per share respectively on the back of market forces and expectations respectively. On the flip side, Ellah Lakes and ABC Transport lost 9.84% and 9.63% respectively, closing at N4.40 and N1.22per share, purely on profit taking.
Market Outlook
We expect mixed sentiment to continue on profit taking, buying interests and portfolio rebalancing ahead of the Q3 earnings reporting session. Also, sector rotation continues in the market, with investors taking advantage of pullbacks to buy into value.
This is amid the volatility and pullbacks that add more strength to upside potential. Consequently, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.
Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
08028164085
