Investors Position On Weak Valuation, As More Earnings Flow In, Ahead Of Next Week’s MPC

Market Update for March 18

Monday’s trading on the Nigerian Exchange opened on a mixed note as profit taking resurfaced, halting the tenth successive sessions of winning streak on a low traded volume and positive market breadth. These came amid the prevailing mixed sentiment with the market facing potential inflation and interest rate peak capable of slowing down the market after it had formed a triple top reversal chart pattern.

The mixed sentiment due to profit booking in the midst of ongoing portfolio rebalancing, as well as hope of more corporate earnings. It is also ahead of next week’s policy meeting to enable the Central Bank of Nigeria reassess the impact of its 400 basis points hike in benchmark Monetary Policy Rate,  besides giving direction as the nation runaway inflation hits a 28-year high, even as the high cost of funds has further put pressure on prices of goods and services. This will continue to push inflation higher, added to the heightening insecurity that had driven farmers away from their farmlands. The CBN, through its monetary policy, usually moves to stabilize prices, improve economic activities and manage government flows, but the opposite is the case today, as the MPC has sacrificed the economy on the altar of attracting foreign inflows for improved foreign exchange supply that will help address FX challenges.

The benchmark NGX All-Share index pulled back to started the week, as highly priced stock like MTNN suffered recorded losses, as other blue chip companies weighed on the market. The triple top reversal chart pattern were formed, which continuation of this trend need to be conform as trading opens Tuesday, even as index action trades above the T-line and 104,000 basis points mark after the pullback in midst of higher yields outlook. We note that the earnings reporting season has entered its peak with all eyes on financial services providers especially to give direction in the face of rising inflation and FX challenges.

At the end of Monday’s trading, more companies notified the investing public of board meetings to approve their 2023 audited financials, the latest were NEM Insurance and Secure Electronic Tech, among others.

Airtel Africa continued its share buyback activities updates, while the outcome of the board meeting of Okomu Oil, Cadbury and others were reported by the boards, just as insider dealings update from Cutix. Therefore, investors should target companies with consistent track records of dividend payment, strong fundamentals and growth prospects that will support further growth in earnings which price feeds on in any market cycle. Technically, the index’s action is still relatively strong with top chart pattern that signaled possible reversal as profit taking is underway.

The bearish hammer candlestick formation revealed reversal of trend, as  momentum indicators were mixed to signal relatively strength in the market, as the ADX inched up at 34.36, while RSI and Money Flow Index are looking up to read 66.38 and 69.05 points against the previous session 68.67 and 63.86 points respectively.  As money flow index looks up to indicate funds flowing into equity space, traders should watch out and trade with caution after the index had formed a top pattern. Also, trading volume pattern remained mixed, to suggests rekindled position taking in some sectors and profit taking in the face of others investment windows returns remain below inflation as naira continues to deprecate.

To navigate the rest of the 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 price on Monday extended its rally to continue its oscillation, as it trades at $86.27 per barrel in the midst of positive economic data from China and tightening supply as a results of attack on Red sea shipping lane, ahead of Fed meeting.  The rising geopolitical tension across the globe remained a major threat to many economies and the commodity market. Also, OPEC left production cuts unchanged and other factors that impact oil price as it continued to oscillate. This trend may likely continue in 2024, this up and down movement that drive volatility. As middle East conflict and war in Ukraine last.

Meanwhile, trading for the session started in the upside before pulling back and oscillated for the rest of the session, on profit taking hitting some stocks, while buying interest continue in some stocks across the major sectors. This situation pushed the NGX’s index to an intraday low of 104,294.05bps from its highs of 105,187.70bps, before closing below its opening figure at 104,663.34bps.

Market technicals for the session were positive and mixed, as volume was higher compared to the previous session in the midst of breadth favoring the bulls on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 41% buy position and 59% sell volume. The total transaction volume index stood at 0.81 points, just as impetus behind the day’s performance was relatively strong as Money Flow Index is looking up at 69.05pts, from the previous day’s 63.86pts, indicating that funds entered the market, despite closing in red.

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Index and Market Caps

St the end of Monday trading, the composite  NGX All-Share Index shed 421.91bps, closing at 104,663.34bps after opening at 105,085.25bps, representing a 0.40% decline, just as market capitalization fell by N238.55billion, closing at N59.18tr from the previous day’s N59.42tr, which also represented a 0.40%  deprecation 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 overbought range has just increased to 60 as they rallied to new highs that call for caution 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.

To become a member, send ‘YES’ or ‘STOCKS’ to the phone numbers below. Take advantage of this service to buy right and sell right at the current oscillating market in the midst of earnings season, portfolio reshuffling, and repositioning as we await an economic reform policy that can stimulate and re-track the economy to the path of growth and development.

The downturn was driven by selloffs and profit taking in MTNN, GTCO, Zenith Bank, Dangote Sugar, NB and Chams among others, which impacted negatively on Year-To-Date gain which reduced to 39.97%. Market capitalization YTD gain stood at N14.42 trillion, representing 43.29% above its opening level for the year.

Bullish Sector Indices

The sectoral performance indexes were in green, save for NGX Consumer goods closed 0.35% lower, while the NGX Insurance advanced the most after gaining 2.95% followed by Banking, Industrial goods and Energy with 2.53%, 0.03% and 0.01% respectively.

Market breadth was positive as gainers outnumbered loser in the ratio of 27:17, while activities in volume and value were up after stockbrokers had traded 287.36m shares worth N10.8bn. Volume was driven by trades in UBA, GTCO, Transcorp, Zenith Bank and FBNH.

ABC Transport and NEM were the best performing stocks, gaining 9.86% and 9.77%, closing at N0.78 and N7.30per share respectively on earnings expectation and market forces. On the flip side, DaarComm and UPDC lost 8.97% and 7.89% respectively, closing at N0.71 and N1.40per share, purely on selloffs and profit taking.

Market Outlook

We expect a mixed sentiment and profit taking to continue as investors digest CPI as investors and traders await the release of more corporate earnings with dividend possibility ahead of te next MPC meeting.  As Investors take advantage of low valuation to position and rebalancing portfolio. This is amid the volatility and pullbacks that add more strength to upside potential. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.

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Theme: Navigating The Stock Market Profitably Amidst Contracting Economy


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Ambrose Omordion

CRO|Investdata Consulting Ltd