Equities

Expect Mixed Trend, Amid Sentiment On Economic Data, MPC Outcome

Market Update for the Week Ended November 19 and Outlook for Nov 22-26

Bearish sentiment and selloffs dominated trading in the week under review when investors and traders busy themselves cashing out profits from the recent rally and repositioning their portfolios for the year-end seasonality and 2021 full-year earnings reporting season. This follows the realization that the power of seasonality and the concept of cycles cannot be overemphasized in equity investing or trading, no matter which of the financial markets.

If you are new to market timing, seasonality, and cycles, the following are some straightforward examples of cycles related to financial markets. Seasonality is either quarterly or yearly and has an influence on the stock market or equity price performance.  When we average periodic cycles of NGX ASI over a 40-year period, some clear patterns can be seen, notwithstanding the fact that this does not necessarily happen every year. It does happen more often than not, meaning that there is a high probability of the market rallying into April. Called the Santa Claus rally, the second upswing is often a strong rally that begins in late October for the last quarter of the year that extends into January, whether positive or negative to change the January Effect story.  Using data from 1998 to 2020, for example, what becomes evident is that over the last 23 years, there have been 16 bullish years with strong returns and performance, while the other seven ended bearishly.

We envisage a mixed trading pattern due to bargain hunting activities in dividend-paying stocks amid intermittent profit-taking activities. That, nonetheless, we advise market players to position in fundamentally sound stocks with positive technicals and sentiments, with fundamentals and liquidity looking up in the face of oil price trading above $81 per barrel in the international market, while the nation external reserves looking up.

Technically, the NGX index’s action on a weekly time frame reveals selling sentiments, while the ADX remained above 20 points at 35.49, just as the money flow index stayed flat at 77.27 points, revealing that funds are still in the equity space. These are indications that confirm volatility, despite the seeming decline on a daily chart as a result of profit-taking, just as the NGX index has pulled back again to test the strong support level of 43,150.47 basis points which signals the possibility of trend continuation on a daily chart. So, there is a need to wait to see what happens in the new week as portfolio repositioning continued on the strength of Q3 earnings reports and positive economic data.

The less than average traded volume, during the week, is an indication that institutional investors are not selling and the volume that took the market up is still very intact. The light volume on the profit-taking activities shows that retail investors like you and I are the ones booking profit.

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Movement Of NGXASI

The benchmark index for the week recorded four sessions of the down market and one day up, finishing the period marginally lower on less than average traded volume and negative market breadth. Trading for the week opened on the downside, after forming a hammer candlestick which resisted further decline, which led to reversal on Tuesday as the key performance index gained 0.49%, following the increased buying interest in telecoms giant- Airtel Africa. There was a pullback at the midweek, as well as Thursday and Friday, when NGX index shed 0.22%, 0.15%, and 0.24% respectively, bringing the week’s accumulated loss to 0.12%, compared to the previous week’s 2.95% gain.

In all, the composite NGXASI shed 53.74 basis points, closing at 43,199.27bps, after touching an intra-week low of 43,150.47bps from its highs of 43,495.91bps, as the week’s opening figure was 43,253.01bps on bearish sentiments and profit-taking in bellwethers stocks. Market capitalization during the period fell by N28.05bn, closing at N22.54tr, compared to the previous week’s N22.57tr, which also represented a 0.12%value loss.

Medium cap stocks dominated the week’s top gainers chart, despite the daily time frame’s negative outing and selling sentiments as a result of profit-taking in MTN Nigeria, Nestle, Dangote Sugar, GTCO, Ardova, UBA, Lafarge Africa, FBN Holdings, NB, and Flour Mills, in the midst of dividend positioning on the strength of nine-month financials and positive economic data.  During the week also, the share prices of Presco, Cutix, and Seplat Energy were adjusted for dividends of N1.00, 15 kobo/one-for-one bonus, and N10.34 respectively.

Market breadth was negative during the week in the midst of the low traded volume and selling sentiment that is likely to continue until after the Central Bank of Nigeria Monetary Policy Committee meeting, the last for the year, this week. Decliners outnumbered advancers in the ratio of 49:15, on a bearish sentiment as revealed by the investors’ sentiment report showing a 86% sell volume and 14% buy position. The money Flow Index was flat at 77.27bps from the previous week’s 77.28 points, an indication that funds did not enter nor exit for the market.

NSEASI WEEKLY CHART MOVEMENT

The NGX index’s action, on a weekly chart, is trading above its 20 and 50-Day Moving Average to sustain a bull-trend, despite the slowdown in profit booking, as it resisted decline after testing the 43,150.47bps strong support level on a less than average traded volume that indicates indecision among players. The candlestick pattern at the end of last week was an inverted hammer candle that revealed weakness, even as the index action is set to break down or retrace up, depending on market sentiment in the new trading week that will support an uptrend or a pullback. However, we need to watch out for the MPC meeting outcome in the new week, just as all eyes are on the fixed income market yields and oil prices that should further support market fundamentals to attract liquidity to the equity space. This pullback has created new buy opportunities.

Bearish Sectoral Indices

The performance indexes across the various sectors were in red, as the NGX Oil/Gas led the decliners after losing 3.63%, followed by Banking, Consumer Goods, Insurance, and Industrial Goods with 1.65%, 1.44%, 0.47%, and 0.10% respectively. Activities in volume and value terms were down, as players exchanged 1.39bn shares worth N27.87bn, compared to the previous week’s 1.47bn units valued at N20.94bn. Volume was driven by Financial Services, Consumer Goods, and Conglomerates, particularly FBN Holdings, GTCO, Sterling Bank, Zenith Bank, and Transcorp.

Vitafoam and Etranzact were the best-performing stocks for the period after gaining 17.11% and 10% respectively, closing at N21.90 and N2.09 per share respectively on dividend expectation and market forces. On the flip side, Cutix and NGX Group lost 42.68% and 11.88% respectively, at N3.21 and N15.95per share, on price adjustment for cash and script dividend and selloffs.

Outlook for the week

We expect a mixed trend and sentiment to continue on positive economic data and outcome of MPC meeting, as bargain hunters continue to take advantage of price pullback in fundamentally sound stocks for repositioning. It is also noteworthy that fund and portfolio managers continue to take a position on Q3 numbers ahead of the current financial year-end. For now, many stocks remain in their buy range to attract funds into the equity space. Also, investors will continue tracking yields movement in the fixed income market.   Also, investors are still observing the interplay of forces in the FX market as the exchange rate in the back market continues to decline. Last week’s above-average volume suggests that institutional investors are not selling. It is noteworthy that oil price continues to oscillate as it trades above $81 in the international market; corporate actions, as well as the interim dividend possibilities, are around the corner.

Invest 2022 Traders & Investors Summit

Theme: Master The Market, Get The Best Of Pre-Election Year 2022

Sub-Topics

1.  Balanced Trading: Playing Nigeria’s Multiple Exchanges For Diversification, MrOlatundeAmolegbe, CEO, Arthur Steven Asset Management  Ltd &President of CIS 
2. Agriculture, Economic Recovery & Diversification: Where Is Commodity Trading In Your Portfolio, MrAkinyinkaAkintunde, Business Development Manager, AFEX Commodities Exchange Ltd.
3. Technical Outlook & Indicators For Profitable Market Timing, Mr Abdul-Rasheed OshomaMomoh, Head Capital Market at, TRW Stockbrokers Ltd 
4. Benefits & Dangers Of Fixed Income Instruments In An Inflationary Environment, MrTeribaAdeboye, MD/CEO, Qualinvest Capital ltd
5. Economic Outlook and implications of the N16.45 Trillion 2022 Budget On Sectors/Stock Market, MrOluwasegunAkinwale, Senior Portfolio Manager,Coronation Asset Management Ltd
6. Profitable Stock Picks Made Easy, Using Fundamental Tools, Mrs. Ebiere Helen Fumudoh, MD/CEO, Norrenberger Securities Ltd
7. The Role of Real Estate & REIT Instruments In the Ecosystem, Mr Tope Ojo, Managing Partner,Tope & Tunde Estate Surveyors &Valuers 

8. Trade Opportunities & 10 Golden Stocks for 2022, Mr Ambrose Omordion, Chief Research Officer, Investdata Consulting Ltd

Investdata Consulting Limited holds the 10th edition of its annual Investment conference tagged Invest 2022 Traders & Investment Summit, which has over the years remained a game changer for market players. This edition is aimed at helping stakeholders identify opportunities and bringing ideas for profitable trading as we enter a pre-election year.

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What to expect at this Summit?
A. Why the market is on high alert for the New Year rally, or Correction
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D. How to take advantage of the circular flow of funds in financial markets
E. Risk/return from Bonds to stocks right now.
F. Key to profitable trading and investing in the stock market/other investment windows

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 1,10 Golden Stocks for 2022
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Don’t miss this summit, if you have any exposure to the stock market, either directly or indirectly via managed funds of any kind……..

Date: December 4, 2021

Time: 9am

Venue: Zoom

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Meanwhile, the home study packs on Comprehensive Stock Market trading course video,Stock Market Analysis Beyond Fundamental & Technical Analysis,  INVEST 2021 New Opportunities & New Paths To Profits Summit materials and 10 Golden Stocks for 2021, Strategies and How to invest profitably in this Changing Market Dynamics/ Recession, Mastering Earnings Season For Profitable Investing and Trading in any market situation/ cycles, Life Beyond COVID 19 Investment Opportunities In The Stock Market are now available. To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085, 08179547605 now.

Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605

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