Expect Mixed Trends On Bargain Hunting, Reactions To Corporate Actions, Profit-Taking

Update for March 2

Panic selling and fear resurfaced on the Nigerian Exchange at the midweek, as changes in trading pattern by market players halted the four straight sessions of bull-run, as investors run for safety in the midst of rising tension in Eastern Europe, owing to the ongoing hostility between Ukraine and Russia, as well as the earnings reporting season. 

The benchmark NGX All-Share index pulled back at the midweek as a result of profit taking and selloffs in the major sectors and among blue chip stocks, despite the impressive numbers and high dividend payouts of these listed companies.  The low traded volume in the midst of negative breadth and selling sentiment shows that many investors are still waiting to see the earnings and corporate actions of companies that are yet to release their scorecards.   

Despite the recent impressive scorecards and payouts from Zenith Bank, Lafarge Africa, NGX Group and others, the market reacted negatively by taking profit, seemingly ignoring the numbers or payout as players run for safety due to the ongoing geopolitical tension that had triggered upbeat in the commodity market with oil price trading above $116 per barrel in the international market, pushing oil and energy stocks higher.  However, oil prices rally is expected to support economic and market fundamentals, as crude oil prices hit new highs. 

 The trading patterns in the midst of corporate actions and the better-than-expected numbers call for caution, as the NGX index action pulled back, touching 47,313.53 basis points on low volume to trade above the 47,000 mark, ahead of more 2021 full-year audited results.      

As we expect market volatility to continue in the midst of an earnings reporting season, this would   provide opportunities for the buy and sell side 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 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. 

Technically, the NGX’s index action remain bullish in the face of buying interest and profit taking in low, medium and high cap stocks to signal a gradual change in momentum and trend as index and indicators are bullish, looking the same direction on a high traded volume. Investors need to watch this, as funds are entering the market as expected, while traders should take advantage of any pullback at this point to position. Trade metrics for the session revealed profit taking and accumulation of position, ahead of fundamental news of dividend and others hitting the market any moment from now, while some stocks like Seplat,  Royal Exchange Assurance, and FCMB among others, hit their new 52-week highs at the close of trading. 

At the end of the day trading, candlestick formation reversal sellers at work which market forces, as the market opens on Thursday morning, will confirm direction as the NGX index trades on top of the shortest moving averages and above the 20, 50 and 200- Day Moving Average.

Momentum indicators are mixed, as the ADX reads 63.08. The RSI closed above 50, but declined to 69.53 from 74.25 and Money Flow Index slipped to 68.28 points on the daily time frame. The continuation of this trend depends largely on the interplay of market forces and flow of funds, as direction of the fixed income market yields remains unclear with TB rates declining further. 

Midweek’s trading opened in the red and was sustained throughout the session, despite oscillating on selloffs and buying interests, a situation that pushed the NGX index to an intraday low of 47,313.62 basis points, from its highs of 47,486.15bps, and thereafter closed below its opening point at 47,360l79bps. 

Market technicals were negative and mixed, as volume traded was lower than in the previous day in the midst of breadth favouring bears on selling sentiment as revealed by Investdata’s Sentiment Report showing a 27% buy volume and 73% sell positions. The total transaction volume index stood at 0.89 points, just as the impetus behind the day’s performance remained relatively strong. Money Flow Index was up at 68.28 points, from the previous day’s 74.02 points, indicating funds entered the market slightly. 

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Index and Mkt Cap Movement 

At the end of Wednesday’s trading, the benchmark NGXASI shed 121.94 basis points at 47,360.79bps, after opening at 47,482.73bps, representing a 0.26% down, just as market capitalization fell  by N66bn, closing at N25.53tr, from the opening value of N25.59tr, also representing a 0.26%  depreciation in value. 

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The session’s downturn was driven by selloffs in stocks like Lafarge Africa, NGXGroup, GTCO, Access Bank, Zenith Bank, Ucap, Vitafoam, UACN, ETI, Dangote Sugar and International Breweries, among others. This impacted negatively on Year-To-Date gain, as it reduced to 10.87%. Market capitalization growth stood at N2.81tr YTD, representing a 14.61% rise over the opening level for the year.

Mixed Sector Indices 

Performance indexes across the sectors were mixed, as NGX Oil/Gas and Insurance indexes closed by 5.09% and 1.01 higher  respectively, while NGX Banking led the decliners after losing 1.32%, followed by Consumer and Industrial Goods with 1.28% and 0.55% respectively.

Market breadth turned negative as losers outnumbered gainers in the ratio of 34:15, while transactions in volume and value terms were down, after stockbrokers traded 278.97m shares worth N4.16bn, compared to previous day’s 370.54m units valued at N7.85bn. Volume was boosted by trades in Transcorp, Ucap, Access Bank, Zenith Bank and FCMB. 

Royal Exchange and Seplat Energy were the best performing stocks for the day, gaining 10% and 9.33% respectively, closing at N1.65 and N1034.00 per share on market sentiment and rallying oil prices. On the flip side, Niger Insurance and International Breweries lost 10% and 9.73% respectively, closing at N0.27 and N5.10 per share, on profit taking.
Market Outlook

We expect a mixed trend on bargain hunters, investors reactions to corporate action and profit taking ahead of the release of more 2021 audited financials with dividend announcement to boost positive vibes during this earnings season and rallying oil prices as it trades at $105. 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 inflation rate moderates at 15.60% and Q4 GDP up at 3.98%, while the International Monetary Fund is calling for hike in interest rate and further devaluation of the Naira. 

Meanwhile, market players continue to digest the quarterly and unaudited 2021 full-year results available in the market and what is happenings in fixed income market after the NGX index pulled back slightly to trade above its 50-Day Moving Average on a low sell volume in the face of assets rebalancing and the changing patterns in February as the investors look forward to more audited 2021 earnings reports. 

The relatively high volume traded in the midst of volatility and recovery moves are creating new buy opportunities on the strength of corporate numbers and economic data. Also, candlestick formation and volume traded during the session shows that institutional players are not buying yet. It is equally noteworthy that during a ranging market, many players sit on the fence waiting for a breakout, or down before jumping into any position. Even so, many stocks are trading within their buy ranges, a situation expected to attract more funds into the stock market, given the Dividend Yield that can serve as a hedge against inflation.

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Ambrose OmordionCRO|Investdata Consulting Ltd

info@investdata.com.ngambrose.o@investdataonline.comambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605

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