Expect Continued Mixed Sentiment, Profit Taking, Positioning Ahead Of Year-end Seasonality

Market Update for December 22

The Santa Claus rally continued on the Nigerian Exchange, although mildly on Thursday, ahead of the Christmas holidays, and end of the year window dressing in the midst seeming buying power and strong momentum as revealed in the short, medium and long term trend of the market. Therefore, signaling the continuation of this recovery into the new year as all eyes are on the expected companies full earnings and corporate actions to support price in the face of 2023 general election uncertainty and post-election rally all things being equal.

The NGX All-Share index trading on a flattish mood in recent times shows the struggle between the bulls and bears for dominance, as Thursday’s trading was very volatile and mixed on continue bargain hunting activities of positioning in value stocks at their current prices ahead of the NGX’s historical peak of earnings reporting season that comes with more liquidity, buying interest, earnings surprises and disappointments.

The benchmark NGXASI closed marginally again on a low traded volume and positive market breadth in the face of buying sentiment and profit taking across the major sectors of the market. Also, the gentle bull-run continued for the seventh consecutive day ahead of year-end window dressing by market players wanting to close higher than they opened the outgoing year, even as more companies continue to notify investors of their board meetings and closed period as a guide for investment decisions.

Despite the uncertainties surrounding the 2023 general elections, there are improving market fundamentals in the face of mixed macroeconomic data and changing yield environment in the fixed income market as revealed by the recent TB primary market auction rates and yield which had suffered a decline across all tenors. Also, the time frame for realizing such yields in the equity space is shorter, as portfolio reshuffling continued with all eyes on the outcome of next auction.

The oscillating volume pattern as positioning and profit taking among the high, medium and low cap stocks continue in the midst of high volatility. Therefore, investors should target companies with a consistent track record of dividend payment with strong fundamentals and growth prospects that will support further growth in earnings that price feed on in any market cycle.

Technically, the NGX extended its markup phase in the face of a topping chart pattern that supports reversal of trend after forming a cup and handle chart pattern on a daily and weekly time frame.  But there is a divergence between the index action and MACD which also support profit taking or pullback. As such, let us keep our gaze on market forces and money flow.

Thursday’s momentum indicators appear  to remain stronger, as the ADX read 55.30, just as, RSI and Money Flow Index are looking up to read 81.08 and 93.63 points against the previous session 80.92 and 93.69 points respectively. Volume trading pattern suggests the gradual return of many players who had been seating on the fence before now, including institutional investors holding cash to confirm the primary’s market direction, especially given the anticipated financial market and economic reset in 2023, that comes with huge opportunities to create wealth for smart investors and traders.

To navigate the rest of the year profitably using fundamental and technical analysis to run, join investdata live sessions at noon every 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 low volume of transaction witnessed, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”

Oil price oscillation continued, as it traded at $82.45 per barrel on India oil and gas demand, as unclear cases of Covid-19 in China and its restriction or reopening in the midst of geopolitical tension and fear of recession as a result of high interest rate and inflation across the globe. Also, supply tightened due to the Russia-Ukraine war that has been lingering. The up and down movement of oil price also continues to drive volatility.

Meanwhile, Thursday’s trading started in the upside and oscillated on positioning and profit taking among the high, medium and low stocks, a situation that pushed the NGX’s index to an intraday high of 49,525.32 basis points from its lows of 49,398.37bps before closing marginally above its opening level at 49,499.43bps.

Market technicals were positive and mixed, with low volume of trade compared to the previous session in the midst of positive breadth and buying sentiment as revealed by Investdata’s Sentiments Report showing 80% buy position and 20% sell volume. The total transaction volume index stood at 0.84 points, just as momentum behind the day’s performance was strong as Money Flow Index looked flat at 92.63pts, from the previous day’s 92.94pts, indicating that funds entered the market.

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Index and Market Caps

The NGX All-Share Index, at the end of Thursday trading inched up by 24.00 basis points, closing at 49,499.43bps after opening at 49,475.43bps, representing a 0.05%, just as market capitalization rose by N13.08bn closing at N26.96tr from the previous day’s N26.95tr, which also represented a 0.05% value gain.

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The session’s upturn was driven by demand for the shares of Julius Berger, Champion, Ardova, Stanbic IBTC, FBNH, Academy Press and Chams, among others, which impacted mildly on Year-To-Date gain, increasing it to 15.88%. Market capitalization YTD gain increased slightly to N4.96tr, representing 20.92% rise over the opening level for the year.

Mixed Sector Indices

Sectorial performance indexes for the session were mixed as the NGX Energy and Consumer goods closed higher by 0.26% and 0.04% respectively, while NGX Insurance led the decliners after losing 0.31%, followed by Industrial goods and Banking with 0.21% and 0.11% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 17:12; whereas activities in volume and value were down, after stockbrokers transacted 132.57m shares worth N3.14bn. Volume was driven by trades in FBNH, Sterling Bank. NB, GTCO and Fidelity Bank.

Julius Berger and Champion Breweries were the best performing stocks, after gaining 9.91% and 9.30%, closing at N23.30 and N4.70per share respectively on earnings expectation and market forces. On the flip side, UPDCREIT and Lasaco Assurance lost 6.45% and 5.56% respectively, closing at N2.90 and N0.85per share, purely on selloffs.

Market Outlook

We expect mixed sentiment and trend to continue on profit taking and positioning by bargain hunters ahead of holidays and year end seasonality in the face of election uncertainty, as pullbacks add more strength to upside potential. As such, investors should take advantage of price correction ahead of year end seasonality. Also looking at the trends and events across the globe and domestically.

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