Earnings Season: Smart Traders Watch Keenly For Opportunities

Market Update

Stocks gained more momentum on the floor of the Nigeria Stock Exchange Thursday, as they closed higher in continuation of the uptrend that started a day earlier, despite the low volume of trade.
Buying position remained high at 94%, while selling position was 6%, with 24 price advancers and 19 decliners, in a rally that was driven by medium and high cap stocks that appreciated in value.
The expected quarterly results for March, June and September accounts kicks off with Guinness Nigeria Plc and Redstar Express Plc making their second and third quarter earnings reports respectively, available to the investing community. The numbers were mixed as Guinness performed obviously below market expectation, reporting a loss before and after tax, while Redstar’s performance was mildly impressive, keeping it earnings trend up for the current financial year.
Meanwhile, Thursday’s trading closed with the composite index NSEASI gaining 49.50 points to close at 26,289.95 points, after opening at 26,240.45, representing a 0.19% rise on low volume of trades.
Similarly, market capitalisation gained N17.03 billion to close at N9.05 trillion from the opening value of N9.03 trillion, which also represented 0.19% value appreciation for the day.
The continued improvement further reduced the negative Year-to-Date returns of the NSE’s All Share index to 2.18%, just as the drop in market capitalisation for the same period came to N201.09 billion.
Market breadth for the day equally remained positive and strong with a ratio of advancers to decliners of 24:19 to continue the previous day’s bull dominance.
Volume and value of trade for the day were down by 23% and 51% respectively, as 146.48 million shares were traded, compared with 190.01 million shares recorded in the previous trading session, while value of trades dropped to N1.19 billion from N2.43 billion. Volume was boosted by transactions in financial services sector stocks, especially Aiico, Access Bank, FBNH, Diamond Bank and FCMB that topped the activity chart as most traded equities by volume.
The NSE benchmark and all sectorial indices were in the north direction, except for the NSE Consumer Goods that closed in red, and NSE Asem that was flat.
Thursday’s up market closed, with FO leading the advancers’ table with 10.25% to close at N71.88, followed by Nascon with 4.96% to close at N8.23. On the decliners side, MRS Oil topped the table with 9.76% to close N39.03, behind was Guinness with 5% to close at N66.55.
Market Update
The benchmark index on a daily time frame is indicating breakout of the falling channel and the symmetrical triangle chart pattern that supports continuation of trend is imminent to confirm uptrend, especially as the quarterly earnings have started hitting the market.
The declining volume of shares traded in a seemingly up market is an indication that smart money is accumulating, ahead of the earnings season as volume index stood at 0.64 as at the end of Thursday’s trading. Traders and investors should watch out for breakout of the up yellow line of the bearish channel to consolidate their positions in value stocks.
The direction and trending ability of the market on a daily time frame is weak as ADX is below 20 but MFI is looking up while RSI is reading 49.37. Also the on balance volume (OBV) is looking up which is pointing to trend continuation.
Stocks To Buy
Aiico, FO, Zenith Bank, Presco, Fidelity, 7up and Total