Market Update for October 22

Trading activities on the Nigerian Exchange sustained a positive momentum on Tuesday, amid buying interest across some sectors and reactions to impressive corporate numbers inflow which impacted the composite NGX All-Share index as it closed higher. Transaction volume was very high, jusg as market breadth stayed positive in the midst of the equally impressive earnings reports from Infinity Trust Mortgage Bank, and Living Trust Mortgage Bank, as well as the mixed numbers from Secure Electronic. Market players reacting  positively also to the other numbers released so far, especially by Transcorp Hotel, United Bank for Africa, while positioning ahead of the expected scorecards. This sentiment is likely to continue when the market opens at midweek.

The uptrend and markup phase continued as the NGX index’s action formed a top reversal chart pattern that signaled reversal or continuation of trend, which need confirmation. More earnings reports are expected to hit the market in the coming days, just as there is a high possibility of volatility and uncertainty due to the prevailing high interest rates and yields in the fixed income market. This would make it difficult for players to pick undervalued stocks, which is why there is the resort to the Relative Strength Index (RSI) a real technical tool that had been tried and tested in identifying oversold stocks set for a rebound. As market players trade the ongoing earnings season, it is time to combine resistance and support levels to catch the value areas of stocks with low RSI values that suggest bullish reversal underway.

Meanwhile, any pullback in the midst of NGX  recovery, portfolio rebalancing and sector rotation which have created opportunities for buying into value at a time some sectors and industries performance are being influenced by policies of the government and various industry regulators. There are also the effects of capacity building to capture more market share among these companies, a situation that supported their numbers and reflected in their top and bottom lines in the previous quarters. Similarly, we cannot underestimate the capacity of earnings news and other factors that drive strength or weakness of any market are the different dynamics of stock markets technically which require effective strategies to navigate and follow trends profitably.

At the current markup phase on the NGX, discerning investors and smart traders are repositioning their portfolios along sectors and companies with potentials to release positive numbers on the strength of their earnings power ahead of their September quarterly earnings reports. Also, seasonal trends are likely to repeat themselves in this last quarter of the year which comes with seasonality and sentiment that makes it very important to market players across the globe. This is especially as retracement from strong support level of 96,568.52 basis points and 96,684.90bps after forming a bottoming tail and uptrend candles. This created the perfect setup for high probability swing trade to catch on ahead of financial news that will impact prices.

Honeywell Flour, Flour Mills Nigeria and others notified the NGX of its closed periods and board meeting dates to approve the Q3 scorecards this month, while others like United Capital, Aradel Holdings and other informed the market of insiders trading and dealing. However, the low valuation and high dividend yield of some companies due to profit taking and pullbacks are creating opportunities for new entrants who understand the big picture and market dynamics at this season.

The NGX index’s action trades above the T-line and two moving averages of 50-EMA and 50-SMA, this indicate buying sentiment in the midst of changing market fundamentals and technicals. We note that the economic reforms of the government, measured by the outpouring of fiscal and monetary policies are yet to put the nation’s economy on the path of recovery. There are also issues with the implementation style amid the oscillating oil production output even as the Naira continues to depreciate at a time that oil is trading above $75 per barrel at the international market.

Technically, the NGX is recovering in the midst of positive momentum and increased transacted volume that signaled position taking, expecting corporate numbers to give a clear direction. Just as candlestick formation and momentum indicators had revealed somewhat returning of strength to the market. As ADX is looking down at 15.98, while RSI and Money Flow Index were up to read 59.42 and 38.11 points against the previous session 61.21 and 49.82 points respectively. Market players should watch this current trend and trade wisely in the face of funds entering the market on buying sentiment in some sectors and profit taking in others. Also, trading volume pattern continued to oscillates, suggesting buying interest and selloffs in the market amid players looking forward to more earnings reports and policy direction of economic managers.

To navigate the rest of this quarter and beyond profitably using fundamental and technical analysis to run, join investdata live sessions at noon every Monday, Wednesday and Friday 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 oscillating volume of transaction witnessed in recent time, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.

Oil prices on Tuesday were slightly up to continue its oscillation, trading at $75.73 per barrel in the midst of  buildup in US inventory  and expected impact of China stimulus measure on demand and  economic growth. Even with ongoing conflict in the Middle East. Also, demand outlook in the midst of rate cuts by the major central banks of the world. The rising geopolitical uncertainties across many economies remains a threat to the global economy and energy consumption. This trend may likely continue for the rest of 2024, while the up and down movement continues to drive volatility, even as the raging war between Ukraine and Russia continues to influence global oil supply and demand.

Tuesday’s trading started in the upside and it was sustained for the rest of th session, despite oscillating on positioning in highly capitalized stocks and others, while selloffs hit some other stocks. This situation pushed the NGX’s index to an intra-day high of 98,913.04bps from its lows of 98,671.70bps, before closing above its opening level at 98,892.60bps.

Market technicals for the session were positive and strong with higher volume when compared to the previous session in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 92% buy position and 9% sell volume. The total transaction volume index stood at 1.33 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index inched up to read 49.82pts, from the previous day’s 38.11pts, indicating that funds entered the market.

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Index and Market Caps

At the end of Tuesday’s trading, the benchmark NGX All-Share Index gained 246.45bps closing at 98,892.58 basis points after opening at 98,694.80bps, representing a 0.20% growth. Market capitalization rose by N120bn, closing at N59.92tr from the previous day’s N59.80tr, representing a 0.64% appreciation in value.

Attention: If you have not signed up for INVESTDATA’s buy and sell signal setup, don’t delay, because the number of stocks entering their oversold range has increased as market correction and volatility call for intelligent  trading and positive chart patterns to be on our watchlist. These stocks have potentials to retrace, considering their earnings prospects and the oscillating moves in an upmarket and weak economy.

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The upturn was driven by position taking in the shares of Transcorp Hotel, Oando, UBA, GTCO, Zenith Bank, UPDC and UACN among others. This impact positively on Year-To-Date gain which increased to 32.26%, while Market capitalization was up to N15.68tr, representing 46.37% above its opening level for the year.

Mixed Sector Indices

Sectoral performance indexes were mixed, as NGX Consumer Goods and Energy  closed  lower by 0.70% and 0.31% respectively, while the NGX Insurance led advancers after gaining 1.22%, followed by  Banking with 0.91%. Just as NGX Industrial goods finished flat.

Market breadth was positive, as gainers outnumbered losers in the ratio of 23:15, while activties in volume and value were mixed after investors exchanged 691.01 million shares worth N24.94 bn. Volume was driven by trades in Champion Breweries, Japaul Gold, UBA, FCMB and C/I Leasing.

Transcorp Hotel and Wapic were the best performing stocks, gaining 9.28% and 9.09% respectively, closing at N106.00 and N0.96 per share respectively on the back of impressive earnings and sentiments respectively. On the flip side, John Holt and Tantalizer lost 9.84% and 9.84% respectively, closing at N2.75 and N0.55per share, purely on selloffs and profit taking.

Market Outlook

We expect positive sentiment and mixed trend to continue on positioning and reaction to impressive numbers, ahead of more Q3 earnings reports. Also, sector rotation and portfolio rebalancing continues in the market, with investors taking advantage of pullbacks to buy into value.

This is amid the volatility and pullbacks that add more strength to upside potential. Consequently, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.

Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

08028164085