Expect Trend Continuation Amid Audited Earnings News, Positive Economic Data

Market Update for February 21

The bullish sentiment and momentum continued on the Nigerian Exchange, as the week opened on a positive note, extending the transition for a second successive session on a very high traded volume and positive market breadth, with buying interests across sectors supporting the key performance index and investors vibes.    

Investors bargain hunting ahead of more earnings releases were triggered by impressive numbers from United Capital and Nigerian Breweries that submitted their 2021 audited financials to the market last Friday with a high dividend payout. The board of Ucap recommended a dividend of N1.50, following which its share price recorded a 20% gain in two days on a strong bid. The company scorecard had revealed a well-managed company out to create value for its shareholders, while Nigerian Breweries declared N1.20 as final dividends.   

Market volatility provides opportunities for the bull and bear side in any 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 you await a major trigger in form of corporate actions.

With all this 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 the exchange. This is necessary to help you make wise investment decisions at every point. Here, we advise you either as investors or traders to allow your stop-loss and profit targets guide you, while removing every atom of emotional attachment to any stock.

Technically, the NGX’s index action sustained a positive trend on position taking in blue chips stocks to trade above the 47,000 mark, signaling a change in momentum and trend as the index and indicators become bullish and mixed, looking in the same direction in the midst of buying sentiments on a higher traded volume. Investors need to watch this, as funds are gradually returning to the market. Trade metrics for the session revealed accumulation of positions, ahead of fundamental news of dividend and others stocks hitting the market any moment from now, while some stocks like UCap, Academy Press, RT Briscoe and Fidelity Bank among others hit their new 52-week highs at the close of trading.

The candlestick formation at the end of the day trading revealed reversal of trend but need to be confirm by market forces as the market opens today, with the NGX index trading on top of the shortest moving averages and above the 20, 50 and 200-Day. Momentum indicators are looking up, as the ADX reads 62.34; the RSI closed above 50 at 71.50 and Money Flow Index sliding to 66.70 points on the daily time frame. The continuation of this trend depends largely on the interplay of market forces and flow of funds into the equity space, as direction of fixed income market yields remains unclear with rates not rising as expected.

Meanwhile, Monday’s trading started slightly on the upside and was sustained on position taking in dividend paying stocks across the sectors that pushed the NGX index to an intraday high of 47,243.74 basis points, from its lows of 47,139.80bps, before closing above its opening point at 47,253.91 bps.

Market technicals were positive and mixed, as volume traded was slightly lower than in the previous day amidst breadth favouring bulls on a strong buying sentiment as revealed by Investdata’s Sentiment Report showing 91% buy volume and 9% sell position. The total transaction volume index stood at 1.37 points, just as the impetus behind the day’s performance remained relatively strong. Money Flow Index was up as earlier noted, at 66.70 points, from the previous day’s 66.07 points, indicating funds entered the market.   

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Index and Mkt Cap Movement 

At the end of Monday’s trading, the NGX All Share index gained 93.43 basis points at 47,243.74bps, after opening at 47,149.48bps, representing a 0.20% up, just as market capitalization rose N51bn, closing at N25.50tr, from the opening value of N25.41tr, also representing a 0.20% value gain.

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Monday’s upturn was driven by position taking in Guinness, May & Baker, UCap, Africa Prudential, Champion Breweries, International Breweries, Academy Press and RT Briscoe, among others. This impacted mildly on Year-To-Date gain, which increased to 10.58%. Market capitalization growth stood at N2.78tr YTD, representing a 14.53% rise over the opening level for the year.

Bullish Sector Indices 

Performance indexes across the sectors closed in green, except for the NGX Oil/Gas that was flat, while the NGX Banking led the advancers after gaining 0.66%, followed by Consumer Goods, Insurance and Industrial goods with 0.37%, 0.22% and 0.01% respectively.

Market breadth turned positive as gainers outnumbered losers in the ratio of 31:17, while transactions in volume and value terms were down, after stockbrokers traded 431.36m shares worth N4.22bn, compared to previous day’s 424.70m units valued at N6.52bn. Volume was boosted by trades in Transcorp, Zenith Bank, Ucap, UBA and Fidelity Bank. 

United Capital and RT Briscoe were the best performing stocks for the day, gaining 10% each, and closing at N13.20 and N0.66 per share on high dividend payout and market sentiments. On the flip side, Juli Pharmacy and Multiverse lost 9.76% and 8.00% respectively, closing at N0.70 and N0.23 per share, on selloffs.

Market Outlook

We expect continuation of trend as traders and investors look out for more 2021 audited financials with corporate actions to boost positive vibes during this earnings season as the market continues to interpret the positive economic data released recently, in the midst of profit-taking and portfolio rebalancing. This will result in market players targeting fundamentally sound and dividend paying stocks in hope of dividend announcements, as oil trades at $94pb, just as inflation rate moderates at 15.60% and Q4GDP 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 the fixed income space, 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 is 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 capable of serving as a hedge against inflation.

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Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605

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