Market Update for July 7
The cautious trading and indecision on the NGX Exchange continued Thursday in the midst of bargain hunting and improved sentiments as the hammer candlestick formation at the end of Thursday trading signaled a reversal pattern ahead of the half-year earnings report season. Thereby halting three consecutive sessions of bear transition on a low traded volume and positive market breadth, just as the short supply in the market indicates that players are unwilling to sell, while waiting to see the latest economic data and corporate numbers.
The first half of 2022 has been stable for the bulls, while the second half just started on a see-saw movement to reflect the wait-and-see attitude of players ahead the Q2 financials news that will influence price movement. As such, if you have been ignoring the charts and fighting the trends now, it is your chance to step up your game. At this current market mood investors and traders should target leaders with strong fundamentals, and positive technicals as market side trend to resist further decline.
As the market closed flat in the new and changing market environment, we look forward to a mixed July, as factors that kept the market on its oscillating trend remain unchanged. This is happening amidst the expectation of interim dividend paying corporate earnings, and others to be game-changers as we go further into the month with increasing political activities ahead of 2023 general elections and ongoing war between Russia and Ukraine.
To navigate the month profitability using fundamental and technical analysis to run, join investdata live sessions at noon every trading day “and 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 selling sentiment witnessed since the beginning of the week, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”
Technically, the NGX index action is on sideways movement on the daily time frame, supported by ‘buy’ interests in blue-chip companies ahead of earnings report. The daily index and price actions as we go into the month will give direction as to what we should do and expect in Q3, just as more insights into the entire second-half will unfold. Market recovery at this point may be powerful, depending on the state of the expected corporate and economic numbers, although with the possibility of maintaining what we saw in 2021 and the Q1 corporate earnings, as portfolio rebalancing and sector rotation continue.
Market players are implored to watch the price actions and volume, which simply mean that the market tells you what to do, and not the other way around, because the price is always right and does not care whatever a trader feels. Bull markets can go on for days, weeks, months, and years, but bear markets happen unexpectedly and can quickly destroy a trader’s profits, or even trading account if a stop loss is not in use.
Oil prices rebounded again in the international market, trading at $105.20 per barrel, after plummeting below its psychological important level of $100pb, amid worry over the weakening demand on increasing fear of a recession, and fear that the oil markets could face a doomsday scenario this week or beyond if OPEC has enough capacity to avoid supply problem as long as the ongoing Russia-Ukraine war persists. Also, the G7 nations plan to cap the price of Russian oil, as chronic high energy prices negatively impacting the global economy by heightening inflationary pressures across the world on a weak economic outlook. These have continued to influence the monetary policy options of central banks as they move to checkmate impacts of the Russia-Ukraine conflict on the global economy to avoid the looming economic recession. Nigeria’s soaring inflation is a potent threat to the fixed income market and investment yields, which should be an indication that there will be a reversal of funds flowing back to equity space in no distant time, as institutional investors rebalance their portfolios.
Technically, the NGX index action has resisted decline, despite trading below the ‘T-Line’ and above the 50-day moving average, with the market remaining strong, despite the correction. The strong support level has been within the 50,000 basis points region, while volatility persists and correction towards the next breakdown is spotted around 51,591.27bps. Should the index break this point, the next visible support is 51,423.75bps.
The possibility of the trend being sustained is high, and a function of market forces and improved economic conditions during this month and beyond, following which we advise investors to play defensive stocks and reduce investment risks around the market.
Thursday’s trading opened slightly on the upside and oscillated for the rest of the session on position-taking and selloffs in blue chip stocks, a situation that pushed the NGX’s index to an intraday high of 51,570.71bps from its highs of 51,530.40ps before closing slightly above its opening points at 51,563.73bps.
Market technicals were positive and mixed, with higher volume traded than the previous day in the midst of breadth favoring bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 83% buy position and 17% sell volume. The total transaction volume index stood at 0.56 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index is looking up at 36.29pts, from the previous day’s 35.13pts, indicating that funds entered the market.
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Index and Market Caps
The composite NGXASI, at the end of Thursday trading gained 7.19bps, closed at 51,563.73bps, after opening at 51,556.54bps, representing a 0.01% up. Similarly, market capitalization rose by N11.98 bn, closing at N27.81tr, from the previous day’s N27.79tr, which also represented a 0.01% value gain, that was equally supported the listing of FGN Eurobond.
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Meanwhile, the session upturn was driven by demand for Accesscorp, Julius Berger, GTCO, Zenith Bank, Sterling Bank, Transcorp, Jaiz Bank and Cutix, among others. This impacted mildly on Year-To-Date gain, as it increases to 20.71%, while market capitalization growth dropped to N5.47tr YTD, representing a 24.69% rise over the opening level for the year.
Mixed Sector Indices
Performance indexes across sectors were mixed, as NGX Industrial Goods and Energy closed flat, while the NGX Banking led the advancers after gaining 0.50%, followed by Consumer goods with 0.12%. As Insurance suffered loss of 0.11%.
Market breadth remained positive, as gainers outnumbered losers in the ratio of 15:10; just as activities in volume and value terms were up, after players exchanged 143.29m shares worth N1.76bn, with volume driven by trades in Jaiz Bank, GTCO, Sterling Bank, UBA and Nahco.
Academy Press and Nahco were the best-performing stocks after gaining 9.55% and 9.41% while closing at N1.72 and N9.30 per share respectively on bonus payment and market forces. On the flip side, RT Briscoe and UPDC lost 8.11% and 7.87% respectively, closing at N0.34 and N1.17 per share, on profit taking.
Friday is the last trading session of this week, and ahead of next week’s two-day Muslim holiday, we expect mixed trading in the midst of bargain hunting and portfolio reshuffling, ahead of the interim dividend season and second-half of the year, while Investors digest the March audited accounts released. We note also the flow of funds into the fixed income segment on the rate hike by the CBN, as sector rotation persists and players digest the macro-economic data and Q4 unaudited earnings released so far. Analysts are also on the lookout for the inflation rate of 17.71% to support recovery in the new month amid oil prices oscillation. Also, the market continues to interpret the rising inflation in relation to the crude 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.
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