Cautious Repositioning, Profit Taking On Nigerian Bourse, Amid Economic Data, Earnings Inflow
Market Update for August 18
Monday’s trading activities on the Nigerian Exchange was mixed, opening the week on a marginal gain, amid continued profit booking and positioning across major sectors of the market. Market players have continued to digest the recent inflation data, as well as repositioning in insurance stocks, helped by the ongoing recapitalization in the sector. This renewed bull sentiment was driven by activities in some consumer goods stocks, among others that pushed the benchmark NGX All-Share index slightly higher. The index day’s gain could have been more, but for pockets of profit taking and selling sentiment in the midst of positive market breadth and low traded volume.
Meanwhile, the seeming rebound witnessed during the session supports recovery as it creates opportunities for traders and investors to take new positioning after the pullbacks and consolidation, even as the market is still at its overbought region. Trading on Monday also halted the three sessions of losses, as some highly priced stocks and others appreciated. This has revealed improved momentum in the market in the face of money flow index inched lower to read 58.77 points which indicates selling sentiment and profit taking ongoing.
The inverted hammer and bottom chart pattern formation in the midst of consolidation and marginal decline in volume traded, as revealed by the volume pattern lower than the previous session and calls for caution as there is the possibility of continuation or reversal is a 50-50 chance. This possibility needs a confirmation as trading opens on Tuesday with expectation of positioning and profit taking in the market ahead of interim dividends payment.
The market is still at a critical level of either a reversal, or continuation of uptrend, with strong momentum as all eyes are on macroeconomic data for insight. Any pullback at this point will create opportunities for new entry and bargain hunting into value stocks and defensive companies and sectors, as the market expects more companies to beat investor expectations. These will further boost market confidence, as government’s economic reforms impact positively on the economy, while foreign investors are also seeing value in the NGX, a situation that has attracted inflow of funds into the market and the economy at large.
The mixed sentiment continued after Trump and Putin failed to reach an agreement on peace talk in Ukraine war, trade tariffs and geopolitical tension in Middle East conflicts to restore peace that will drive global economic recovery and stability. Also, all eyes are on Europe leaders and Trump meeting in regard to Ukraine war, being another opportunity for peace talk, even as major stock markets of the world have oscillated as a result Trump leadership pattern and policy statements here and there.
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 mixed, indicating that funds left the market, despite position taking that presents opportunities to buy low and sell high in the midst ongoing volatility and overbought state of the market. The index inched up on a selling sentiment, thereby creating the perfect setup for high probability of continuation to catch good entering position 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. As RSI slowdown to read 82.66 still at overbought zone.
Market pulse as revealed by the candlestick formation and momentum indicators shows that ADX is looking down to read 88.12points, while RSI and Money Flow Index were mixed at 82.66 and 58.77points against the previous session’s 82.53 and 63.62 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 Monday inched up, continuing its oscillation, trading at $66.60per barrel, in the midst of Trump meeting with Zelenskiy and fear of another sanction on Russia to end war. Even as geopolitical uncertainties persists on a global supply headwinds. Also, the ceasefire in Mideast for peace talks that seem to be shaking, and that of Ukraine-Russia peace talk. Even as OPEC production hike misguide the market. The ongoing developments will trigger inflation and rate hikes if peace is achieved. All eyes are on emanating quarterly earnings reports. 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.
Monday’s trading started in the upside and it was sustained throughout the session, despite oscillating on buying interests in some of major sectors and profit booking in other companies. This situation pushed the composite All-Share index to its intra-day high of 144,998.60bps from its lows of 144,612.80bps, before closing marginally above its opening level at 144,722.50bps.
Market technicals were positive and mixed 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 28% buy position and 72% sell volume. The total transaction volume index stood at 0.85points, as energy behind the day’s performance was relatively strong, as Money Flow Index was down to read 58.77pts, from the previous day’s 63.62pts, indicating that funds left the market, despite closing slightly in the green.
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Index and Market Caps
At the end of Monday trading, the composite NGXASI inched up by 94.27bps, closing at 144,722.50bps from 144,628.20bps, representing a 0.07% up, while market capitalization rose by N59.6 billion to close at N91.56tr from the previous day’s N91.24tr, representing a 0.07% value gain.
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Meanwhile, Monday’s upturn was driven by demand and accumulation in the shares of Custodian, Wema Bank, Dangote Sugar, UPDC, Champion and Cornerstone among others, which impacted mildly on Year-To-Date gain which inched higher to 40.61% while Market capitalization gain stood at N40.12tr, representing 46.12% increase over its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Insurance and Consumer goods closed higher with 5.26% and 1.15% respectively, while NGX Banking index led the decliners after losing 1.15%, followed by Energy and Industrial goods with 0.28% and 0.12% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 43:25, while activities in volume and value were mixed, after investors exchanged 1.04billion shares worth N16.17bn, with volume driven by trades in Universal Insurance, Linkage Assurance, LASACO, Mutual Benefits and Veritas Kapital.
UPDC and Aiico Insurance were the best performing stocks, gaining 10% each, closing at N7.15 and N4.18 per share respectively on the back of sentiment and market forces. On the flip side, Stanbic IBTC and PZ lost 9.99% and 7.89% respectively, closing at N100 and N35.00per share, purely on profit booking.
Market Outlook
We expect mixed sentiments to continue on positioning and profit taking in the midst of sector rotation and portfolio rebalancing. As players digest economic and corporate numbers in the face of bargain hunting and cautious trading, while investors buy into value in the midst of portfolio reshuffling, even as few quarterly reports are expected to hit the market.
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
