Market Update for August 14 

Midweek’s trading extended the bear dominance on the Nigerian Exchange, as the major sectors witnessed profit taking and selloffs that further pushed down the benchmark NGX All-Share index on a low traded volume and negative market internals that revealed the market’s weakness and opportunities for discerning players.

These are happening amid the inflow of macroeconomic data and interim dividend announcement expectations, even as the current pullbacks or correction has increased opportunities available on the NGX. However, investors and traders must correctly trade volatility to get the gains it offers, while protecting their portfolios from being on the wrong side of the market, or any surprise big down day. This is why your understanding of volatile trend days and reversal days with technical tools will help you benefit from market volatility or oscillation at any time and any day.

Weak momentum and sentiment persisted as reflected in the market dynamics of volatility that creates the needed opportunity to buy low and sell high, especially as most of the listed companies have become undervalue, even as the pullbacks are driven by high cap stocks that are facing selloffs due to sector rotations and portfolio rebalancing. This pullback below the 98,000 psychological line, T-line and 50-Day Moving Averages confirms weakness of momentum and the distribution phase of the market.

Profit taking across major sectors of the market also weighed in on the NGX, creating opportunities for market players to pick value stocks at discounted prices. This is especially now that corporate numbers reveal the position of many companies on the exchange, despite the ongoing economic headwinds. The selling sentiment and pullback are a different phase of market that requires change in strategies to navigate and follow the trend.

However, it is expected that smart money will take advantage of the oversold state in the market to buy into value and defensive stocks, as numbers released so far have been mixed, while earnings of low cap stocks and some highly capitalized companies beat market expectations. This is especially true of service providers like banks, insurance and others in the face of low valuation and pullbacks witnessed in the market recently.

The market continues to trade within the value area, creating entry opportunities for discerning investors and smart traders, even as transaction volume patterns and support levels signal the ‘buy zone’ ahead of July consumer price index and banks interim dividend announcement. This pullback may not last on the strength of earnings power of many undervalue and growth stocks.

The NGX index’s action remains below the T-line and the two moving averages of 50-EMA and 50-SMA indicate weakness 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, due to the continued mismatch of these and previous ones. 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 rebounding to sell above $80 per barrel at the international market.

Meanwhile, more companies notified the exchange of their Annual General Meetings. The latest came from FBN Holdings, while Airtel Africa continues to update the Exchange of its ongoing share buyback programme. Also, Julius Berger made available its 2023 sustainability report, while, Ucap and Initiates Plc informed the exchange of insider dealings in its shares. In the midst of all these, it is safe for investors to target companies with consistent track records of dividend payment, strong fundamentals and growth prospects that will support further growth in earnings which price feeds on in any market cycle.

Technically, the NGX is weak on a pullback with selling sentiments as revealed by the candlestick formation and momentum indicators. The ADX is looking down at 28.26, while RSI and Money Flow Index were mixed to read 37.38 and 19.26 points against the previous session 38.37 and 19.12 points respectively. Market players should watch this current trend and trade with caution in the face of funds leaving the market, despite position taking in some sectors. Also, trading volume pattern continued to oscillates, suggesting buying interest and selloffs in some sectors in the midst of players digesting half year numbers.

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 slowdown to continue its oscillation as it trades at $79.87 per barrel in the midst of ongoing Middle East tension and OPEC supply curbs, as concern about economic growth and future demand weighed on oil prices. Rising geopolitical uncertainties across many economies is a threat to the global economy. 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.

Trading for the session started in the green, before being pulled back, oscillating for the rest of session on profit taking and buying interest in blue chip companies, a situation that pushed the NGX’s index to an intra-day low of 97,220.56bps from its highs of 97,477.07bps, before closing below its opening level at 97,248.82bps.

Market technicals for the session were negative and mixed with lower volume when compared to the previous session in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 11% buy position and 89% sell volume. The total transaction volume index stood at 0.57 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index was down to read 19.26pts, from the previous day’s 19.12pts, indicating that funds entered the market, despite closing in the red.

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Index and Market Caps

The NGX All-Share Index at the end midweek’s trading lost 141.19 basis points, closing at 97,248.82bps after opening at 97,390.01bps, representing a 0.17% drop. Market capitalization fell by N80bn, closing at N55.22tr from the previous day’s N55.30tr, which also represented a 0.17% value loss.

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 pullbacks call for caution 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 day’s downturn was driven by profit taking and selloffs in Seplat Energies, NB, Zenith Bank, GTCO, Oando, UBA, Transcorp, Fidelity Bank and Cutix among others. This impacted negatively on Year-To-Date growth reduced to 30.09%. Market capitalization YTD gain fell to N10.32tr, representing 34.94% above its opening level for the year.

Bearish Sector Indices

Sectoral performance indexes closed in the red led by the NGX Insurance which fell 0.90%, followed by Banking, Consumer goods, Energy and Industrial goods with 0.17%, 0.17% and 0.02% respectively.

Market breadth was negative as losers outnumbered gainers in the ratio of 24:22, while activities in volume and value were down after investors exchanged 315.30m shares worth N5.48bn. Volume was driven by trades in Veritas Kapital, GTCO, Universal Insurance, Oando and FBN Holdings.

Guinea Insurance and RT Briscoe were the best performing stocks, gaining 10% and 9.87% respectively, closing at N0.44 and N1.67 per share respectively on the back of market forces and sentiment respectively. On the flip side, Oando and Cutix lost 9.95% and 9.92% respectively, closing at N36.20 and N5.36 per share, purely on profit taking and selloffs.

Market Outlook

We expect mixed sentiment and bargain hunting to continue on profit taking and sector rotation amidst oversold region. Portfolios repositioning is however continuing, as investors take 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