Investors Stay Cautious Amid Profit-taking, Positioning Ahead Of Year-end, Election Uncertainty

Market Update for December 21

Ahead of the Christmas holidays, the nation’s stock market continued its bull dominance at the midweek as bargain hunting activities persisted with investors and traders looking to position in value stocks at their current prices ahead of the NGX’s historical peak of earnings reporting season and corporate actions. Irrespective of profit taking activities from recent gains by speculators, the NGX‘s primary trend remains strong and is expected to continue its recovery in the new year.

The benchmark NGX All-Share index closed marginally in the northward on a very high traded volume and positive market breadth in the face of buying sentiment and strong momentum, just as the bull rampage continues for the sixth successive session ahead of year-end window dressing by market players wanting to close higher than they opened the outgoing year. Also, market players are already anticipating full-year financial reports, even as more companies continue to notify investors of their board meetings and closed period as a guide for investment decisions.

Despite the uncertainties surrounding the 2023 general elections, there are improving market fundamentals and mixed macroeconomic data in the face of a changing yield environment in the fixed income market as revealed by the recent TB primary market auction rates and yield which had suffered a decline across all tenors. Also, the time frame for realizing such yields in the equity space is shorter, as portfolio reshuffling continued with all eyes on the outcome of next auction.

The oscillating volume pattern as positioning and profit taking among the high, medium and low cap stocks continue in the midst Santa Claus rally and high volatility. Therefore, investors should target companies with a consistent track record of dividend payment with strong fundamentals and growth prospects that will support further growth in earnings that price feed on in any market cycle.

Technically, the NGX extended its markup phase in the face of a topping chart pattern that supports reversal of trend after forming a cup and handle chart pattern on a daily and weekly time frame.  But there is a divergence between the index action and MACD which also support profit taking or pullback. As such, let us keep our gaze on market forces and money flow.

Momentum indicators at the end midweek trading appear stronger, as the ADX read 54.60, just as, RSI and Money Flow Index are looking up to read 80.92 and 93.69 points against the previous session 80.52 and 92.94 points respectively. Volume trading pattern suggests the gradual return of many players who had been seating on the fence before now, including institutional investors holding cash to confirm the primary’s market direction, especially given the anticipated financial market and economic reset in 2023, that comes with huge opportunities to create wealth for smart investors and traders.

To navigate the rest of the year profitably using fundamental and technical analysis to run, join investdata live sessions at noon every 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 low volume of transaction witnessed, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”

Oil price oscillation continued, as it rebounded again to trade at $82.47 per barrel on controversial gas cap, as unclear cases of Covid 19 in China and its restriction or reopening in the midst of geopolitical tension and fear of recession as a result of high interest rate and inflation across the globe. Also, supply tightened due to the Russia-Ukraine war that has been lingering. The up and down movement of oil price also continues to drive volatility.

Midweek’s trading opened in the green and was sustained throughout the session on demand for financial stocks and others, despite the seeming profit taking, a situation that pushed the NGX’s index to an intraday high of 49,492.97 basis points from its lows of 49,416.51bps before closing marginally above its opening level at 49,475.43bps.

Market technicals were positive and strong, with higher volume of trade 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 77% buy position and 23% sell volume. The total transaction volume index stood at 2.45 points, just as momentum behind the day’s performance was strong as Money Flow Index looked up at 92.94pts, from the previous day’s 92.95pts, indicating that funds entered the market.

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Index and Market Caps

At the end of Wednesday’s trading, the benchmark NGX All Share Index inched up by 59.25 basis points, closing at 49,475.43bps after opening at 49,416.18bps, representing a 0.12%, just as market capitalization rose by N32.28bn closing at N26.95tr from the previous day’s N26.92tr, which also represented a 0.12% value gain.

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Meanwhile, the session’s upturn was driven by buying interests in the shares of Africa Prudential, Champion, University Press, Chams, Learn Africa, FBNH, Fidelity Bank and GTCO, among others, which impacted mildly on Year-To-Date gain, increasing it to 15.82%. Market capitalization YTD gain increased slightly to N4.95tr, representing 20.86% rise over the opening level for the year.

Mixed Sector Indices

Sectorial performance indexes for the session were mixed as NGX Insurance closed 0.14% lower, while NGX Banking led the advancers after gaining 0.22%, followed by energy and consumer goods with 0.08% and 0.05% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 21:11; just as transactions in volume and value were up, after investors exchanged 100.09m shares worth N1.30bn. Volume was driven by trades in UPDCREIT, FBNH, GEREGU, Zenith Bank and GTCO.

University Press and Thomaswy were the best performing stocks, after gaining 9.83% and 9.68%, closing at N1.90 and N0.68per share respectively on market forces. On the flip side, Japaul Gold and Mutual Benefits Assurance lost 3.70% and 3.45% respectively, closing at N0.26 and N0.28per share, purely on profit taking and selloffs.

Market Outlook

We expect mixed sentiment and trend to continue on profit taking and positioning by bargain hunters ahead of holidays and year end seasonality in the face of election uncertainty, as pullbacks add more strength to upside potential. As such, investors should take advantage of price correction ahead of year end seasonality. Also looking at the trends and events across the globe and domestically.

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