Market Update for August 28

It was a negative outing on the Nigerian Exchange at the midweek as the composite NGX All-Share index closed lower on a less than average traded volume and positive market internals in the face of profit taking, halting three sessions of bull transition as investors digest the latest macroeconomic data. Market players are also using the opportunity to position in high quality stocks with strong fundamentals and positive technical, given that the correction and pullbacks witnessed in recent time have created entrance opportunities ahead of month end and last quarter of the year.

However, the session had a selling sentiment in the face of top reversal chart pattern that supports pullback at the oversold state of NGX that provides guidance for discerning investors and smart traders to take the much needed decision. The market retraced in mixed days of weakness and strength, despite closing in the red to trade above the psychological line of 96,000 after testing 96,746.42bps as highly priced stocks weighed down the market.

The mixed momentum and sentiment continues to reflect in the market’s dynamics of volatility that creates the needed opportunity to buy low and sell high, especially as most of the listed companies have become undervalued owing to the recent downtrend in their share prices, even as the pullbacks are driven by capitalized stocks that are facing selloffs due to sector rotations and portfolio rebalancing. This pullback below the T-line and 50-Day Moving Averages confirms the weakness of momentum and distribution phase of the market.

Buying interest across some major sectors of the market did not impact the NGX, but selloffs in other sectors weighed on it, creating opportunities for players to pick value stocks at discounted prices. This is especially true now that corporate numbers reveal the position of many companies on the exchange. The selling sentiment and pullback are a different phase of market that requires change in strategies to navigate and follow the trend. It is expected that smart money will take advantage of the oversold state in the market to buy into value and defensive stocks to support rebound any moment from now.

The NGX index’s action remains below the T-line and the two moving averages of 50-EMA and 50-SMA indicate weakness in the midst of changing market fundamentals and technicals. We note that the economic reforms of the government, measured by the outpouring of fiscal and monetary policies are yet to put the nation’s economy on the path of recovery, due to the continued mismatch of these and previous ones. There are also issues with the implementation style amid the oscillating oil production output even as the Naira continues to depreciate at a time that oil is selling below $80 per barrel at the international market.

More companies notified the NGX of their AGMs and resolutions therefrom, the latest were VFD Group, Sovereign Trust Insurance and University Press, while Airtel Africa continued to update the market with its share buyback. Also, Eterna notified the market of the appointment of company secretary, just as The Initiate and Ucap informed the exchange of insider dealings in its shares. In the midst of all these, it is safe for investors to 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 NGX is still weak but trying to rebound in the face of selling sentiments as revealed by the candlestick formation and momentum indicators. The ADX is looking down at 31.86, while RSI and Money Flow Index were down to read 37.19 and 44.41 points against the previous session 39.69 and 45.84 points respectively. Market players should watch this current trend and trade with caution in the face of funds leaving the market, despite position taking in some sectors. Also, trading volume pattern continued to oscillates, suggesting buying interest and selloffs in some sectors in the midst of players digesting the recent inflation and GDP numbers.

To navigate the rest of this 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 prices pulled back at midweek to continue its oscillation as it trades at $78.69 per barrel in the midst of fear of US economic hard landing and Libya oil shutdown. Coupled with the escalating tension in the Middle East conflict that increased the risk of supply disruptions. As rising geopolitical uncertainties across many economies is a threat to the global economy. This trend may likely continue for the rest of 2024, while the up and down movement continues to drive volatility, even as the raging war between Ukraine and Russia continues to influence global oil supply and demand.

Midweek’s trading started in the upside before pulling back to  oscillate for the rest of the session on selloffs in highly priced stocks and  buying interests in  some blue-chip companies and others, a situation that pushed the NGX’s index to an intra-day low of 96,137.14bps from its highs of 96,746.42bps, before closing below its opening level at 96,204.01bps.

Market technicals for the session were positive and mixed with higher volume when compared to the previous session in the midst of breadth favoring the bulls on a selling sentiment as revealed by Investdata’s Sentiments Report showing 11% buy position and 98% sell volume. The total transaction volume index stood at 0.88 points, just as energy behind the day’s performance was relatively weak as Money Flow Index was down to read 44.41pts, from the previous day’s 45.84pts, indicating that funds left the market.

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Index and Market Caps

At the end of Wednesday, the NGX All-Share Index shed 306.12 basis points, closing at 96,204.01bps after opening at 96,510.13bps, representing a 0.32% drop. Market capitalization fell by N176bn, closing at N55.26tr from the previous day’s N55.44tr, representing a 0.32% depreciation 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 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.

This downturn was driven by profit taking and selloffs in the shares of MTNN, Accesscorp, Jaiz Bank, Wema Bank, CWG, Wapco and Neimeth Pharm among others. This impacted negatively on Year-To-Date growth inched down to 28.66%. Market capitalization YTD gain up to N10.21tr, representing 33.67% above its opening level for the year.

Bullish Sector Indices

Sectoral performance indexes were up, except for the NGX Industrials goods Index that closed lower by 0.01%, while the NGX Insurance led the advancers after gaining 1.87%, followed by Banking, Energy and Consumer goods with 0.62%, 0.53% and 0.16% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 34:14, while activities in volume and value were mixed after investors exchanged 446.61 million shares worth N4.53bn. Volume was driven by trades in Universal Insurance, Japaul Gold, Prestige Assurance, Tantalizer and Chams.

Industrial Medical Gases and Chams were the best performing stocks, gaining 10% and 9.95% respectively, closing at N26.40 and N2.32 per share respectively on the back of market forces and sentiment respectively. On the flip side, Neimeth Pharms and Tantalizer lost 9.09% and 8.64% respectively, closing at N2.00 and N0.74 per share, purely on profit taking.

Market Outlook

We expect mixed sentiment to continue as players take profit amid sector rotation as market enters oversold region. Portfolio repositioning is however continuing, with investors taking advantage of pullbacks to buy into value.

This is amid the volatility and pullbacks that add more strength to upside potential. Consequently, 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

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

08028164085