NGX May Breakout Recent Resistance, On Inflows, Amid Santa Claus Rally
Market Update for December 20
The NGX’s benchmark All-Share index sustained a positive outing on Monday to close the first trading session of the Santa Claus week higher, however, on less than average traded volume, but a positive breadth. The market, thereby, extended the bull transition for the consecutive day.
The continued bargain hunting activities on blue chip companies and dividend paying stocks across the banking, healthcare consumer and industrial goods sectors supported the composite index to maintain its recovery move.
As the market enters the last lap of the historical trends and patterns for year-end activities on the exchange, discerning investors and market players should keep their gaze on fundamentally sound stocks. Such must also have good growth prospects, even as other economic factors are likely to impact investors’ decisions. Especially as the year winds down to usher in the peak earnings reporting season in Q1 2022 that comes with a strong momentum, improved activities and increased liquidity, among other factors that influence equity prices positively.
Technically, the NGX index’s action has rebounded on a mixed sentiment to trade between the 20 and 50-Day Moving Average on a buying sentiments. Also, the prevailing low traded volume reveals the low liquidity and absence of institutional players in the market. Momentum indicators for the day were up, as the ADX is reading 26.38, RSI crossing the 50 at 50.14 and Money Flow Index looking up at 33.24 points on the daily chart. The continuation of this trend depends largely on the interplay of market forces and inflow of funds into the equity space as fixed income market yields direction remains unclear.
Meanwhile Monday’s trading opened slightly in the upside and was sustained throughout the session despite vacillating on selloffs and buying interests in blue-chip stocks that pushed NGX index to an intraday high of 42,464.09 basis points, from its lows of 42,351.93bps and thereafter close above its opening point at 42,394.71bps.
Market technicals for the day were positive and mixed as volume traded was lower than the previous day’s in the midst of breadth favoring the bulls on a mixed sentiment as revealed by Investdata’s Sentiment Report showing 62% sell position and 38% buy volume. The total transaction volume index stood at 0.46 points, just as the energy behind the day’s performance remained relatively weak. Money Flow Index is look up at 33.24 points, from the previous day’s 29.81 points, indicating that funds entered the market.
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Index and Mkt Cap Movement
At the end of Monday’s trading, the key performance index inched up 41.40 basis points, at 42,394.71bps after opening at 41,353.31bps, representing a 0.10% up, just as market capitalization rose by N21.61bn, closing at N22.13tr, from the opening value of N22.11tr, also representing 0.10% appreciation in value.
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Monday’sy upturn was driven by position taking in Dangote Cement, NGXGroup, FBNH, GTCO, Zenith Bank, GSK, and UPDC, among others, which impacted mildly on Year-To-Date gain, lifting it to 5.27%. Market capitalization growth stood at N1.14tr YTD, representing a 5.05% Improvement on the year’s opening value.
Mixed Sector Indices
The sectoral indexes recorded a mixed performance, as NGX Insurance and Energy indexes closed 0.48% and 0.41% lower respectively, while the NGX Industrial Goods led the advancers, after gaining 0.31%, followed by Banking and Consumer goods with 0.29% and 0.03% respectively.
Market breadth remained positive as gainers outnumbered losers in the ratio of 21:11, while transactions in volume and value terms were down after investors exchanged 142.17m shares worth N2.49bn, compared to the previous day’s 341.68m units valued at N3.54bn. Volume was driven by trades in FBNH, GTCO, Sovereign Trust Insurance, Mutual Benefits Assurance and Aiico Insurance. Neimeth Pharmaceuticals and UPDC were the best-performing stocks after gaining 9.82% and 9.43% respectively, closing at N1.79 and N1.16per share respectively on market forces. On the flip side, C / I Leasing and Consolidated Hallmark Insurance lost 8.70% and 6.90% respectively, closing at N4.20 and N0.54 per share, purely on selloffs and profit taking.
Market Outlook
We expect NGX to breakout its recent resistance level after testing 42,464.09 as inflow into equity space is improving on changing investment decision to keep this trend ahead of Christmas holidays. As market players digest economic data and happenings in fixed income market after the NGX index action retraced to trade above its 50-Day Moving Average on a low buy volume in the face of assets rebalancing and seasonality likely to influence stock prices ahead of year-end window dressing.
The relatively low volume traded in the midst of retracement is creating new buy opportunities on the strength of the Q3 numbers. Also, candlestick formation and volume traded during the session revealed that institutional players are not buying yet. It is equally noteworthy that during a ranging market many players seat on the fence waiting for a breakout or down before jumping into any position. Even as 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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