Market Update for October 7 

The new week started positive on the Nigerian Exchange, as the bull transition continued for a second successive session after rebounding from the impact of the selloff in Dangote Cement, and quarter-end profit taking that resulted in pullback amid portfolio reshuffling and position taking ahead of Q3 earnings reporting season. Also, the release dates for early filers to kick start the quarterly earnings season continue to draw closer, just as all eyes are on the expected September Consumer Price Index. This is expected to give clue as to what the investing and banking public should expect from CBN policy meeting in November, while business activities remain contraction mode on the back of the high interest and exchange rates regime driving mixed macroeconomic indices and weak economic expansion.

The benchmark NGX All-Share index closed higher on a very high traded volume and positive market breadth in the face of buying sentiment and recovery phase which are different dynamics of stock markets technically that require effective strategies to navigate and follow trends. Also, breadth expansion continues with few stocks selling above their 52-week high, while others are in an undervalued state amid sector rotation. This is needed to create buy opportunities for growth companies and defensive stocks that would support this rebound on strength of the expected corporate numbers and other macroeconomic data.

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 fundamental news that revealed the earnings power and capacity of the companies.

More companies continued to notify the NGX of their closed periods and board meeting dates to approval their scorecards in the month of October. 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.

Despite, the rebound recorded so far, the NGX index’s action is still weak and trading below the T-line and 50-EMA, while above 50-SMA to indicates recovery 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 regaining strength and it is likely to continue on the strength of corporate and economic numbers which will determine the next direction 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 up at 21.72, while RSI and Money Flow Index were mixed to read 50.23 and 55.36 points against the previous session 48.30 and 56.03 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 Monday were in green to continue its oscillation, as it trade at $79.97 per barrel in the midst of fear of escalating middle tension and possible negative impact on supply from this key oil producing region, despite the positive US job report 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, Monday’s trading opened in the upside and was sustained throughout the session on buying interest blue chip companies and others, while profit taking and selloffs hit some stocks.  This situation pushed the NGX’s index to an intra-day high of 97,802.95basis points from its lows of 97,401.99bps, before closing above its opening level at 97,706.70bps.

Market technicals for the session were positive and strong with higher volume when compared to the previous session in the midst of breadth that favour the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 76% buy position and 24% sell volume. The total transaction volume index stood at 0.65 points, just as impetus behind the day’s performance was relatively strong as Money Flow Index was fell to read 55.36pts, from the previous day’s 56.03pts, indicating that funds left the market, despite closing in green.

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Index and Market Caps

The composite NGX All-Share Index closed on Monday with a 186.16 basis points gain, closing at 97,706.70bps after opening at 97,520.54bps, representing a 0.19% up. Market capitalization rose by N107.03bn, closing at N56.15tr from the previous day’s N56.04tr, representing a 0.19% value gain.

Attention: If you have not signed up for INVESTDATA’s buy and sell signal setup, don’t delay, because the number of stocks entering their oversold range has increased as market correction and volatility call for intelligent  trading and positive chart patterns to be on our watchlist. These stocks have potentials to retrace, considering their earnings prospects and the oscillating moves in an upmarket and weak economy.

To become a member, send ‘YES’ or ‘STOCKS’ to the phone numbers below. Take advantage of this service to buy right and sell right at the current oscillating market in the midst of earnings season, portfolio reshuffling, and repositioning as we await an economic reform policy that can stimulate and re-track the economy to the path of growth and development.

The upturn was driven by position taking and accumulation in MTNN, Oando, Fidelity Bank, UBA, Dangote Sugar and Livestock Feeds among others. This expectedly had positive impact on Year-To-Date gain which inched to 30.67%, while Market capitalization was up to N11.45tr, representing 37.27% above its opening level for the year.

 Mixed Sector Indices

Sectoral performance indexes were mixed with the NGX Insurance and Industrial goods index closing 0.50% and 0.14% lower respectively, while the NGX Banking index led advancers after gaining 0.81%, followed by Consumer goods and Energy with 0.40% and 0.33% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 28:23, while transactions in volume and value were mixed after investors exchanged 1.31 billion shares worth N5.96bn. Volume was driven by trades in UBA, Accesscorp, Caverton, GTCO and Ellah Lakes.

Fidelity Bank and ABC Transport were the best performing stocks, gaining 10% and 9.76% respectively, closing at N14.30 and N1.35 per share respectively on the back of impressive interim dividend of 85 kobo and expectations respectively. On the flip side, SCOA and Berger Paints lost 10% and 9.95% respectively, closing at N1.71 and N19.00per share, purely on profit taking.

 Market Outlook

We expect mixed sentiment to continue on 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