Market Update for October 15
Bullish sentiment on the Nigerian Exchange continued Tuesday, as the composite NGX All-Share index closed higher amid a low traded volume and negative market breadth at a time of positive corporate earnings releases and negative macroeconomic data. The September consumer price index, for example, reversed up to read 32.7% year-on-year, reflecting the general hike in prices of goods and services across the country, even as government continues to increase prices of premium motor spirit, otherwise known as petrol and energy costs. This continues to exert more pressure on cost of transportation and production in the economy today. The situation is made worse by the unabated insecurity in the land that had driven many farmers from their farmlands just as there is also the evil of policy mismatch between the fiscal and monetary authorities.
Simple economics indicates that higher interest and exchange rates will result in higher cost of goods and services for importing economy like ours. This is the time to rethink our policy formulation process and implementation, if we really want to recovery and make progress. How do the nation economic managers think of using higher interest rate to checkmate inflation where PMS is currently selling above N1000 in many states today? These numbers are likely to guide investing public decision ahead of CBN policy meeting in November.
The NGX index action breakout the resistance level of 98,223.04 basis points, after forming a triple top chart pattern on a low traded volume in the face contracting breadth, buying sentiments and funds leaving the market as indicated by money flow index. To confirm continuation of this trend, market players should watch for today market forces and sentiment, because pullback is underway except other sectors corporate earnings beat expectation as seen in the Utility industry. 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 markup phase in the midst of breadth contraction provides entry opportunities into value stocks by discerning investors and smart traders as repositioning of portfolios along sectors and companies with potentials to release positive numbers on the strength of their earnings power continue ahead of more Q3 numbers.
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.
Wapic Insurance 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 recovering powerfully, trading above the T-line and two moving averages of 50-EMA and 50-SMA, this indicates strong momentum 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. 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 below $75 per barrel at the international market.
Technically, the NGX is on an uptrend in the midst of buying sentiment, expecting corporate and economic numbers to give a clear direction. As these reports hits the market any moment from now. Candlestick formation and momentum indicators had reveal a mixed position of strength returning and weakness in the market. As ADX inched down at 18.88, while RSI and Money Flow Index were mixed to read 58.92 and 45.84 points against the previous session 55.88 and 46.89 points respectively. Market players should watch this current trend and trade with caution in the face of funds leaving the market on buying 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 on Tuesday fell as it continued oscillating, trading at $74.24 per barrel in the midst of weak china economic data and geopolitical tension over supply shock in the wake of continued conflict in the middle east. Also, weak demand outlook in the midst of rate cuts by the major central banks of the world. 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.
Tuesday’s trading started in the green and it was sustained for the rest of the session on buying interest in blue companies and oil stocks. This situation pushed the NGX’s index to an intra-day high of 98,573.12basis points from its lows of 98,215.132bps, before closing above its opening level at 98,540.93bps.
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 buying sentiment as revealed by Investdata’s Sentiments Report showing 91% buy position and 9% sell volume. The total transaction volume index stood at 0.62 points, just as energy behind the day’s performance was relatively weak as Money Flow Index inched down to read 45.84pts, from the previous day’s 46.89pts, indicating that funds left the market, despite closing in green.
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Index and Market Caps
The NGX All-Share Index closed Tuesday with a 325.80bps gain at 98,540.93bps after opening at 98,215.13bps, representing a 0.33% growth. Market capitalization rose by N197 billion, closing at N59.71tr from the previous day’s N59.51tr, representing a 0.33% value gain.
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Meanwhile, the upturn was driven by position taking and buying interest in the shares of Dangote Sugar, Oando, GTCO, Aradel Holdings,Eterna and Champion among others. This expectedly had positive impact on Year-To-Date gain which increased sharply to 31.79%, while Market capitalization was up to N15.32tr, representing 42.21% above its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed, as the NGX Energy and Consumer Goods closed higher by 0.13% and 0.07% respectively, while the NGX Insurance led decliners after losing 2.11%, followed by Banking with 0.78%, while NGX Industrial goods finished flat.
Market breadth was negative as losers outnumbered gainers in the ratio of 28:15, while transactions in volume and value were mixed after investors exchanged 286.04 million shares worth N26.82bn. Volume was driven by trades in Accesscorp, Zenith Bank, Aradel Holdings, UBA and Veritas Kapital.
Champion Breweries and Tantalizer were the best performing stocks, gaining 9.97% and 9.09% respectively, closing at N3.42 and N0.60 per share respectively on the back of earnings turning positive in Q3 and market forces respectively. On the flip side, Caverton and Tripple Gee lost 10% and 9.95% respectively, closing at N2.34 and N1.81per share, purely on profit taking.
Market Outlook
We expect mixed sentiment to continue on positioning and profit taking ahead of more Q3 earnings reports. Also, sector rotation and portfolio rebalancing 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
