Market Update for July 1
Trading on the Nigerian Exchange started the month of July on a negative note Tuesday, following mixed session of position taking and profit booking on blue chip companies and highly priced stocks that weighed on the benchmark NGX All-Share index closed lower on a low traded volume in the midst of positive expanded market breadth and pullbacks. The NGX has witnessed four straight days of pullbacks and profit taking in the face of forming a bottom chart pattern that signal reversal and sliding into a decline, or markdown phase of the market ahead of the consumer price index report for the month of May, first half earnings reporting season in the new month of July and Central Bank of Nigeria policy meeting later in the month.
The pullbacks, or market correction is an opportunity for new entrance and bargain hunting, as the market gather more energy to rebound and surpassed the recent high in the month, ahead of the earnings reporting season, especially if the expected numbers beat market expectation in the face of the Monetary Policy Rate remaining unchanged at its forthcoming policy meeting, if the inflation rate for May further declines. With the bottom chart pattern at the end of Tuesday’s trading session and low supply which indicates smart money may markup prices in the midst of strong positive market internals which needs confirmation as trading opens for the midweek. That notwithstanding, there is still cautious trading, while investors catch on pullbacks to buy into value ahead of company’s quarterly earnings reports.
The low traded volume indicates the wait and see attitude of investors, even as institutional investors presence is still in the market to reveal a level of confidence around government’s economic reforms, while foreign investors are also seeing value on the NGX, a situation that has supported inflow of funds into the market and the economy at large. Nevertheless, the expected mixed trend in Q3, may not halt the bull trend if the expected corporate earnings beat expectation. Already, the slowdown in fixed income market rates has triggered money flowing into the market as last week’s TB primary market auction rate declined across all tenors.
All eyes are still on expected macroeconomic reports and unfolding global uncertainties due to the Middle East ceasefire moves for peace talk, which had impacted positively on major stock markets of the world. Nonetheless, there is need to avoid panic selling, even as profit booking could arise. As such, let your trading plan and investment objective guide your entry and exit. It is noteworthy that the improvement in macroeconomic data points to where the domestic economy is heading. This is the time to pay close attention to momentum, price action and market structure while timing your trades and avoiding losing money with your stop loss. While navigating the market and targeting value on the strength of companies’ performance and prospect, focus on growth and defensive stocks with strong earnings power and positive technicals in the face of sector rotation persisting.
Technically, money flow and other momentum tools were down indicating that funds are leaving to the market on profit taking that presents opportunities to buy low and sell high in the midst ongoing volatility and overbought state of NGX. The index pulled back on a selling interest, thereby creating the perfect setup for high probability of continuation to catch better-than-expected corporate earnings to reposition at the right price. Also, the index action trading above T-line and the two moving averages of 50-EMA and 50-SMA which reveals strength in the midst of changing market sentiment and technicals on the NGX. But RSI signal overbought market at the current level or zone, which also called cautious trading and know when to cash out profit even when taking positions.
Investors sentiment as revealed by the candlestick formation and momentum indicators shows that the ADX is strong to read 62.12 points, while RSI and Money Flow Index were down at 76.59 and 49.08 points against the previous session’s 78.74 and 54.47 points respectively. NGX at this point call for players to be watchful and trade wisely in the midst of distribution phase and selling sentiment in some sectors and profit taking in others on a daily time frame. Also, trading volume pattern continues to oscillate, suggesting smart money are present in the market amid revaluation of the market and short-term opportunities, looking at economic events in the face of policy direction of the government and global economic outlook in the face of uncertainties and geopolitical tensions.
To navigate the rest of Q3 and beyond profitably, it is important to run with economic events, fundamental and technical analysis, join investdata live sessions at noon every Monday, Wednesday and Friday’s trading session “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 pullbacks. Despite the oscillating volume of transaction witnessed in recent time, it is time to position in undervalued stocks, sectors and the next insider playing opportunity.
Oil prices on Tuesday inched up to continued its oscillation, trading at $67.31 per barrel, in the face of ceasefire in Mideast for peace talks continues to hold, and Ukraine-Russia war.
The Organisation of Petroleum Exporting Countries (OPEC), in all these is seemingly confused. The ongoing developments will deflate inflation and rate hikes if peace is achieved. All eyes are on oil cartel meeting this weekend. Tariffs and geopolitical tensions are already driving mixed macroeconomic data emanating from the U.S and China which remain a concern for investors. Just as uncertainties across many economies remain a major source of concern to the global economy and energy consumption in 2025. This trend may likely continue, while the up and down movement continues to drive volatility.
Tuesday’s trading opened slightly in the green before pulling back to oscillate throughout the session on selling and profit taking in large cap stocks and others. This situation pushed the NGX’s index to intra-day low of 119.697.70bps from its highs of 120,179.70bps, before closing below its opening level at 119,741.20bps.
Market technicals were mixed and weak with lower volume when compared to previous session in the midst of breadth that favors the bulls on a selling sentiment as revealed by Investdata’s Sentiments Report showing 9% buy position and 91% sell volume. The total transaction volume index stood at 0.73points, just as energy behind the day’s performance was relatively strong, as Money Flow Index was inched lower to read 49.08pts, from the previous day’s 54.47pts, indicating that funds left the market.
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Index and Market Caps
At the end Tuesday’s trading the NGX All-Share Index further shed 237.34 basis points, closing at 119,741.23bps from 119,978.57bps, representing a 0.20% decline, while market capitalization fell by N150.24bn to close at N75.80tr from the previous day’s N75.95tr, representing a 0.20% depreciation in value.
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Meanwhile, Tuesday’s downturn was driven by profit taking and selloffs in the shares of PZ Cussons, Oando, Dangote Cement, Zenith Bank, Accesscorp, Dangote Sugar, SterlingNG and GTCO among others, which impacted negatively on Year-To-Date gain which inched lower to 16.34% while Market capitalization gain stood at N21.41tr, representing 20.86% increase over its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed as the NGX Consumer Goods and Banking indexes closed 31.60% and 17.99% higher respectively, while the NGX Industrial goods led the decliners after losing 3.17%, followed by Insurance and Energy with 2.24% and 1.81% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 46:23, while activities in volume and value were down, after investors exchanged 527.07 million shares worth N11.2bn, with volume driven by trades in Ellah Lakes, UPDC, Universal Insurance, NB and Japaul Gold.
Honeywell and McNichols were the best performing stocks, gaining 10% each, closing at N23.65 and N2.53 per share respectively on the back of sentiment and market forces. On the flip side, University Press and SCOA lost 10% and 9.83% respectively, closing at N5.04 and N4.86 per share, purely on profit taking and selloffs.
Market Outlook
We expect mixed sentiments on bargain hunting and sector rotation, as traders wait to confirm reversal after bottom chart pattern formation. Investors buying into value as they digest dividend payout of March year end and others in the midst of portfolio reshuffling, even as few audited accounts are expected to hit the market with dividend announcement.
Also, sector rotation and portfolio rebalancing continued in the market with investors taking advantage of price correction 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
ambrose.o@investdataonline.com
Tel: 08028164085, 08179547605
