Market Update for the Week Ended August 9 and Outlook for August 12-16
The bulls resurfaced on the Nigerian Exchange (NGX) in the first full trading week of August, halting two weeks of selloffs and pullbacks on rekindled buying interests in blue-chips and highly capitalised stocks which impacted positively on the benchmark NGX All-Share index which closed higher.
Despite the selloff or shake out on the NGX, the market recorded a mixed trend in the face of improved buying sentiment that supported the seeming rebound and positive outing for the week. Traded volume was on above average, forming a hammer candlestick pattern that indicates sellers pushing down prices while buyers pushed it in the opposite direction on position taking in value stocks and sector rotation on the strength of earnings power ahead of the July inflation data and banks’ interim dividend announcement. This chart pattern was revealed on NGX weekly chart after two consecutive weeks of price correction and selloffs.
The NGX has been shaku lately as a result of portfolio reshuffling and sector rotation on the back of corporate earnings scorecards released to the market recently. What are the opportunities on the table for discerning investors and smart traders as the market retraces from its oversold zone to reveal values in different stocks from across the major sectors of the market? Since every investment is against the future expectation, government policies, company information, macroeconomic data and others that influence prices in the short to long-term should guide your investment decisions as you follow the trends and changes in the market. Better understanding of the big picture of the market and our actions as market players in any market cycle would determine your results or returns ultimately.
There is the changing momentum and direction of the market today as players digest quarterly earnings, with the increased number of companies likely to declare interim dividend. As all eyes are on the banks for 2024 half year dividend announcement. Despite the rising economic headwinds being witnessed today, there is also the ongoing economic reforms of the government and challenges in the exchange market which continue to threaten investor confidence with the unfolding economic policies.
Technically, strength is returning to market, as NGX index action trades above the T line on a daily chart but still below 8 EMA on a weekly time frame. With the double bottom chart pattern and hammer candlestick formation at the end of the week under review, the possibility of uptrend is high in the new week. The sentiment report for the period revealed a buying sentiment of 99% buy position and sell volume of 1% as MFI looked up slightly to reads 56.60 points which indicates that funds entered the market during the week. Trading above 50 SMA and EMA. Trading above the T line on a daily time frame reflects improving momentum. Positive market breadth for the period occurred in the midst of position taking and sector rotation. As bargain hunters took advantage of pullbacks to buy into fundamentally sound companies with high yield, strong earnings power and low valuation.
To navigate the rest of Q3 market volatility and its mixed outlook profitably using fundamental and technical analyses to run, join Investdata’s Live Sessions at noon every Mondays, Wednesdays and Fridays. Also, get investdata’s 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 corrections and pullbacks to continue the markdown phase. As volume of transaction witnessed within the week remain low, it is time to go shopping for undervalued stocks, sector rotation and the next insider dealing opportunity.
Oil price during week oscillated to recorded a weekly gain after hitting three months low, to trade at $79.66per barrel following the rising tension in the middle East in the midst of expected US rate cuts and declining fear of recession. As increasing geopolitical tensions around the world threats supply, coupled with ongoing war in Ukraine and Russia disrupting oil output in the face of osculating price and OPEC supply cut to manage price. The up and down movement of oil price has continues to drive volatility across different investment windows and inflation again.
Movement Of NGXASI
The bulls dominated trading for the week with the NGX index action recording three sessions of up market and two days of negative outing to close above the 98,000 pyscholigical line on an above average traded volume and positive market breadth in the face of buying interest during the period. The share prices of Transcorp Power, Transcorp Hotels and their parent company-Transcorp Plc, as well as Okomu Oil Palm were adjusted for dividends of N1.50, 10 Kobo, 10 Kobo and N8.00 respectively.
Trading for the period under review opened on a negative note, halting the previous session gain with the index closing 0.17% lower on Monday, a trend that was sustained on Tuesday when the market pulled back with 0.67%, before the reversal at the midweek on position taking and buying sentiment as the benchmark index recovered an initial 0.20% that signaled a top-bottom pattern. This was reversed on Thursday when the NGXASI gained a significant 1.05% on bargain hunting and buying interests on low valuation of blue chip companies as highly priced stocks had pulled back previously. This momentum was sustained on Friday when the index rose by a further 0.45, bringing the week’s total gain to 0.87%, compared to the 0.46% loss in the previous week.
In all these, the NGX All-Share Index gained 846.39 basis points, closing at 98,592.12bps, from previous week’s 97,745.73bps closing level, after touching an intra-week high of 98,631.04bps from a lows of 96,843.07bps. Market capitalisation also rose by N471bn to N56.98tr, representing a 0.87% value gain.
The week’s top advancers’ table was dominated by medium and low priced stocks in the midst of buying interest and low valuation ahead July consumer price index and banking results hitting the market. Also notable was the fact that market players were taking advantage of the pullbacks to reposition their portfolios and carrying out sector rotation.
Market technicals for the period were positive and strong as revealed by volume and market breadth, with advancers outnumbering decliners in the ratio of 46:38 on a buying sentiment as indicated by investdata sentiment report showing 99% ‘buy’ volume and 1% sell position. Money Flow Index was looking up at 56.60 points from the previous week’s 55.93 points, an indication that funds entered the market on a weekly time frame.
Technical View
The NGX index’s action at the end of the week formed a double bottom chart pattern and hammer candlestick that signaled trend reversal, which needs to be confirmed in the new week, as more banks half year financials and macroeconomic numbers are expected to hit the the market in the face of changing momentum and sentiment, especially from the agribusiness, financial service providers and oil companies. The position taking for the period in the face of low valuation and protest, even when higher yields in the alternative market still remain below inflation rate.
Already, the index has entered its distribution phase on the weekly chart. We note that 98,843.07 and 94,538.12bps are strong support levels on the daily and weekly time frame, even as the index on the weekly time frame is on range bound. The market is at a critical zone as all eyes are on more banks results to support market fundamentals and attract inflow again. Also, we note that investors are taking long-term positions in the face of dividend expectations and volatility.
We also note that buyers are in control, as revealed by the buying sentiment and positive market breadth, as the index is trading below the T line and above 50-Day Moving Average on the weekly chart.
Bullish Sectoral Indices
The sectoral indexes of the week were up, except for the NGX Industrial Goods that closed 3.7% lower, while NGX Banking led the gainers after losing 5.08%, followed by Consumer Goods, Insurance and Energyg with 2.30%, 1.82% and 1.00% respectively.
Activities in volume and value were down, as players exchanged 2.68bn shares worth N49.02bn, compared to previous week’s 3.39bn units valued at N52.30bn. Volume was driven by Financial Services, Oil/Gas industry and ICT industry, boosted specifically by Accesscorp, Veritas Kapital, UBA, Zenith Bank and Fidelity Bank.
Oando and RT Briscoe were the best performing stocks during the week, gaining 60.47and 51.19% respectively, closing at N40.60 and N.27 per share on market forces and sentiment. On the flip side, Champion Breweries and BUA Cement lost 15.03% and 9.99% respectively, at N2.77 and N128.90 per share, on selloffs.
Outlook for the week
We expect a mixed sentiment as players cashed out profit and react to the expected July inflation report. Also, as more banks earnings reports are likely to hit the market in the face of portfolio rebalancing. Also, bargain hunters are taking advantage of pullbacks to buy into value stocks. As investors are watching with rapt attention.
However, retracement to the 96,000bps level and below is possible on correction as global and domestic events unfold.
Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08179547605
