Update for March 8
The panic trading pattern on the Nigerian Exchange was deepened Tuesday, as more blue chip companies and highly priced stocks suffered losses due to selloffs and profit-taking that had lingered for five successive trading sessions on a high traded volume and negative market breadth. This was just as market players continued to weigh the risk of the Russian-Ukrainian conflict on global and domestic economy.
Tuesday market volatility widen as a result of Nestle, Lafarge Africa, NB and others pulling back for investors to buy ahead of dividend qualification and markdown dates, in the midst of high payouts and expectations of more 2021 financials hitting the market.
The truth is that the Nigerian equity market is not smiling at all, as profit-taking and selloffs persist across major sectors, especially blue-chip stocks, despite the impressive numbers emanating from quoted companies. The high traded volume in the midst of negative breadth and mixed sentiment, however, is an indication that many investors are still waiting to see the earnings and corporate actions of companies that are yet to release their numbers.
Despite the better-than-expected earnings and high payouts offered by many companies so far, the market has reacted negatively amidst sustained profit-taking, seemingly ignoring the numbers or payout as players run for safety, while keenly observing developments in the political space ahead of next year’s general elections.
Meanwhile, the ongoing geopolitical tension continues to trigger the rise in commodity prices, as Brent crude trades above $127.50 per barrel at the international market, pushing oil and energy stocks higher, while exerting more pressure in inflation rate across the globe. However, the lingering oil prices rally is expected to support economic and market fundamentals, as crude oil prices hit new 14-year high.
The trading patterns in the midst of corporate actions and impressive numbers call for caution, as the NGX index action pulled back, touching 47,122.34 basis points on a high volume to trade above the 47,000 mark, ahead of more 2021 full-year audited results.
We expect market volatility to continue in the midst of an earnings reporting season, offering opportunities for the ‘buy’ and ‘sell’ sides of the market, but it is more important than ever to get good clear, and concise information to help firm up your trading and investing plans as the market awaits more big names to release their corporate earnings and actions as a push for positive reversal.
With all these in mind, I want to personally invite you to join me live today at Investdata Trading Academy with Ambrose every trading day at noon to get the real live position of the market and direction of individual stocks on exchange. This is necessary to help you make investment decisions at any point. Here, we advise you either as investors and traders to allow their stop-loss and profit targets guide you, while removing every atom of emotion.
Trade metrics for the session revealed profit-taking and positioning, as the NGX index trades below the seven and 20-Day Moving Averages, while other indicators are looking down. While the ADX slowed down to 59.82, for example, the RSI remained above 50, but declined further to 61.76 from 67.48. Money Flow Index reversed down to 64.63 points on the daily time frame. The continuation of this trend depends largely on the interplay of market forces and flow of funds, as the direction of the fixed income market yields remains unclear with TB primary market auction opening today to determine new rates at the end of the offer.
Meanwhile, Tuesday’s trading opened on the upside before pulling back, oscillating on selloffs and position taking, a situation that pushed the NGX index to an intraday low of 47,122.34 basis points, from its highs of 47,282.62ps, and thereafter closed below its opening point at 47,154.35bps.
Market technicals were negative and mixed, as volume traded was higher than in the previous day in the midst of breadth favouring the bears on selling sentiments as revealed by Investdata’s Sentiment Report showing a 20% ‘buy’ volume and 80% ‘sell’ positions. The total transaction volume index stood at 2.34 points, just as momentum behind the day’s performance remained relatively strong. Money Flow Index was down at 64.63 points, from the previous day’s 69.32 points, indicating funds left the market.
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Index and Mkt Cap Movement
At the end of Tuesday’s trading session, the composite NGX All-Share Index shed 108.26 basis points at 47,154.35bps, after opening at 47,262.61bps, representing a 0.24% drop, just as market capitalization fell by N56bn, closing at N25.41tr, from the opening value of N25.47tr, also representing a 0.24% depreciation in value.
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The session downturn was driven by selloffs and profit-taking in Nestle, Lafarge, NB, Zenith Bank, Access Bank, Flourmills. Honeywell, Ucap, Oando, NEM, University Press, Conoil, and FBNH, among others. This impacted negatively on Year-To-Date gain, as it reduced to 10.39%. Market capitalization growth stood at N2.72tr YTD, representing a 14.29% rise over the opening level for the year.
Bearish Sector Indices
Performance indexes across the sectors were down, led by the NGX Insurance after losing 2.16%, followed by Consumer, Energy, industrial goods and Banking with 2.15%, 0.77%, 0.12%, and 0.06% respectively.
Market breadth turned negative as losers outnumbered gainers in the ratio of 28:16, while activities in volume and value terms were up, after stockbrokers traded 754.93m shares worth N3.64bn, compared to the previous day’s 179.93m units valued at N2.86bn. Volume was boosted by trades in Unity Bank, GTCO, UBA, Zenith Bank and Japaul Gold.
The best-performing stocks for the day were Niger Insurance and Consolidated Hallmark Insurance gaining 9.52% and 8.47% respectively, closing at N0.23 and N0.64 per share on market sentiment and forces. On the flip side, Conoil and Jaiz Bank lost 10% each, closing at N23.85 and N0.72 per share, on profit taking.
Market Outlook
We expect a mixed sentiment and return of the bulls on reaction to corporate action and earnings in expectation of more release of 2021 audited financials with dividend announcement to boost positive vibes during this earnings season and rallying oil prices. Also, the market continues to interpret the positive economic data in relationship with oil price and other factors, in the midst of profit-taking and portfolio rebalancing. This will result in market players targeting fundamentally sound and dividend-paying stocks in the hope of dividend announcements, as the inflation rate moderates at 15.60% and Q4 GDP up at 3.98%, while the International Monetary Fund is calling for a hike in the interest rate and further devaluation of the Naira.
Q2 Master Class Theme
Trading Opportunities in A Volatile Market & Defensive Sectors In A Pre-Election Year
Sub-Topics
A. Great & Tested Strategies For Trading In Unstable Market, Alhaji KurfiGarba MD/CEO Apt Securities & Funds Ltd
B. Technical Tools As Timing Edge To Manage Volatility Risk & Identify Buy Opportunities, Mr Abdul-Rasheed Oshoma Momoh, Head Capital Market at TRW Stockbrokers Ltd
C. The Power of Earnings in a Post Pandemic Shift & Political Uncertainty, Mr Ambrose Omordion, Chief Research Officer, Investdata Consulting Ltd
Take way from this master class:
1. The volatile start to the year in financial markets is set to continue for this year and beyond 2023 election.
2. Economic recovery, high inflation, a post-pandemic repricing of equity, global trend and the Ukraine-Russia war have the potential to disrupt markets
3. How to navigate through this pre-election year environment and its challenges, as market volatility and sector rotation should present good opportunities for discerning traders and investors.
4. Simple valuation process for stock picking that combines fundamental and technical analyses for your watchlist and stock picks.
5. Hot stocks to deliver 2-time inflation rate returns and gains in 91 days
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Time: 9.am – 4pm
Venue: ZOOM
Fee: 50K
Discerning investors and traders know that highly volatile markets create exceptional opportunities, while novice and amateur traders can often have a different response to volatility, which leads FEAR.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
ambrose.o@investdataonline.com
Tel: 08028164085, 08179547605
