Investors Set To Latch On Price Corrections, Amid Mixed Sentiments, Dividend Investing

Market Update for May 8

Midweek’s was yet another mixed session on the Nigerian Exchange as the bearish momentum subsided on position taking and portfolio rebalancing among investors on the strength of corporate earnings and ahead of macroeconomic data such as the Consumer Price Index for April, and the Q1 GDP data.

Consequently, the composite NGX All-Share index closed flat just as transaction volume was low, and market breadth negative to form a reversal chart pattern that signaled that an uptrend is underway, depending on market forces as trading opens on Thursday. The bear transition has, therefore, extended to three consecutive sessions, creating buy opportunities for discerning investors and bargain hunters, as the dividend rain continued with qualification and payment dates to guide positioning.

There is also the impact of the outcome of midweek’s TB primary market auction as rates or final yields remained unchanged in the face of rainy dividend income, which should trigger further flow of funds into the equity space. Market players continue to digest and reposition their portfolios on the strength of Q1 numbers and changing market fundamentals. Dividend incomes are expected to provide some level of liquidity to the market as payment and AGM meeting dates announced by various companies fall within this month of May.

The pullbacks in the midst of buying interest in highly priced stocks supported the market, as investors and traders took advantage of low prices and valuation to buy into value, given the oversold state of the market and mixed technical position as revealed by the bottom chart pattern at the end of midweek trading which signals the onset of a reversal of trend or continuation that needs to be confirm. Already, the Q1 numbers are likely to be the game changer, as more corporate earnings are expected and unfolding happenings in the economy to further give insight and guide player’s decisions.

The NGX index’s action still trades below the T-line and 50-Day Moving Average slightly, confirming the weight of highly priced stocks in the market and mixed momentum, as the index slide down on a high traded volume and positive market breadth close to 8-day moving average exponential and 50 DMA to confirm continuation or reversal of trend depending on market forces and liquidity level.

Market players are also looking at corporate actions to position for dividend income. Although, we see fiscal and monetary policies trying to return the nation’s economy to the path of recovery, even with the continued mismatch of policies and implementation style. As oscillating oil production output.

More companies on the exchange are notifying investors of their AGM and board meetings, the latest being Custodian Investment, John Holt,  and others. Airtel Africa has continued to update the market on its share buyback and UBA informed the market of its insiders dealing. 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, there is a reversal signal on the NGX, as the market slide on buying sentiment as revealed by candlesticks formation and momentum indicators. As ADX is looking down at 34.64, while RSI and Money Flow Index are mixed to read 36.00 and 41.60 points against the previous session 36.02 and 41.53 points respectively.  Market players should watch this current trend and trade with caution after the index had signaled reversal in the face of funds entering the market slowing down. Also, trading volume pattern remained mixed, to suggests wait and see in some sectors and buying interest in the face of a distributing market.

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Oil price inched up at midweek, as it continues its oscillation to trade at $83.58 per barrel in the midst of drop in US inventories and stronger dollar. As tension in Middle East and mixed macroeconomic data from matured economies persists.   Geopolitical tension across the globe remained a major threat to many economies and the commodity market and other factors that impact oil price as it continued to rally. This trend may likely continue in 2024, this up and down movement that drive volatility. As middle East conflict and war in Ukraine last.

Midweek’s trading opened flat before pulling back to oscillate for the rest of the session on positioning in some high price stocks and profit taking in others. This situation pushed the NGX’s index to an intra-day low of 98,048.96bps from its highs of 98,248.87bps, before closing marginally below its opening figure at 98,223.97bps.

Market technicals for the session were mixed and weak, as volume was lower 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 88% buy position and 12% sell volume. The total transaction volume index stood at 0.70 points, just as energy behind the day’s performance was  relatively weak as Money Flow Index inched up to read  41.60pts, from the previous day’s 41.53pts, indicating that funds entered  the market, despite sliding down.

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Index and Market Caps

At the end of trading, the benchmark NGX All-Share Index lost 4.53bps, closing at 98,223.97bps after opening at 98,228.50bps, representing a 0.04% dorp, just as market capitalization fell by N2.56bn, closing at N55.55tr from the previous day’s N55.55tr, which also represented a 0.04%  value loss.

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 pullbacks 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 profit booking and selloffs in the shares of PZ, Wapco, Accesscorp, GTCO, Zenith Bank, International Brew and Linkage Assurance among others. This impacted mildly on Year-To-Date gain which slow down to 31.4%. Market capitalization YTD gain stood at N11.47tr, representing 36.72% above its opening level for the year.

Bearish Sector Indices

The sectoral performance indexes were in red, save for  NGX Oil/Gas that closed flat, while the NGX Banking index led the decliners after losing 1.03%, followed by  Consumer, Industrial goods and Insurance  with 0.27%, 0.22% and 0.15% respectively.

Market breadth turned negative as losers outnumbered gainers in the ratio of 19:14, while activities in volume and value were mixed after investors exchanged 319.07m shares worth N9.17bn. Volume was driven by trades in UBA,  Transcorp, Accesscorp, GTCO and Fidelity Bank.

Okomu Oil and Tantalizer were the best performing stocks, gaining 9.98% and 9.33% respectively, closing at N255.70 and N0.39 per share respectively on market forces and injection of capital. On the flip side, PZ and International Breweries lost 10% and 9.89% respectively, closing at N34.20 and N3.92per share, purely on selloffs and profit taking.

Market Outlook

We expect mixed sentiments to continue in the face of low price attraction, dividend investing and reaction to Q1 numbers as Insurance corporate earnings are expected with dividend announcements, while taking advantage of pullbacks 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.

Ambrose Omordion

CRO|Investdata Consulting Ltd