Market Update for August 29
The seesaw movement on the Nigerian Exchange in the last trading week of August continued on Thursday, revealing strong volatility that creates buy opportunities for market players who understand the big picture of equity investment and its dynamics in any condition that may arise. It is a known fact that investing strategies in any market work with seasonality and timing to deliver value for discerning investors and smart traders.
On Thursday, the NGX All-Share index closed higher short-living the previous session’s losses on a very high traded volume and positive breadth in the face of mixed sentiment ahead of the month end. Already, month to date negative position stood at 1.40%, much in line with the historical data of August as a down and dicey month on the NGX.
The seemingly improved macroeconomic data as seen from the recent inflation and Q2 GDP figures should guide players engaging in sector rotation and portfolio reshuffling while buying into high quality stocks with strong fundamentals and positive chart pattern, given that the last month of the quarter comes with mixed trends and outlook ahead of last quarter of 2024.
However, the mixed sentiment in the midst 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 mixed momentum and trend continues to reflect in the market’s dynamics of volatility that creates the needed opportunity to buy low and sell high, especially as most listed companies have become undervalued owing to the recent downtrend in their share prices. The market retracement at above the T-line, but below the 50-Day Moving Average confirms the mixed momentum at recovery phase of the market.
Accumulation of shares in some mid to high cap stocks impacted the NGX, as players pick value stocks at discounted prices. This is especially true now that corporate numbers had reveal the position of many companies on the exchange. The mixed sentiment and recovery 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 trades slightly above the T-line to indicate gradual return of strength to the market, even as is still below the two moving averages of 50-EMA and 50-SMA 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 progress, 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 rebounding to trade above $80 per barrel at the international market.
On Thursday, Airtel Africa continued to update the market with its share buyback. Also, Oando notified the market of the resignation of a director, just as The Initiate Plc 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 recovering in the face of mixed sentiments as revealed by the candlestick formation and momentum indicators. The ADX is looking down at 31.42, while RSI and Money Flow Index were up to read 39.90 and 48.33 points against the previous session 37.19 and 44.41 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 macroeconomic data.
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 retraced up on Thursday to continue its oscillation as it trades at $80.17 per barrel in the midst of fear the Middle East conflict hampering supply and global weak demand outlook. Even with expected rate cut by Fed in September. 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.
Meanwhile, Thursday’s trading opened in the green and it was sustained throughout the session, despite oscillating on buying interests in some blue-chip companies and profit taking in others, a situation that pushed the NGX’s index to an intra-day high of 96,512.98bps from its lows of 96,203.65bps, before closing above its opening level at 96,408.22bps.
Market technicals for the session were positive and strong with higher volume when compared to the previous session in the midst of breadth favoring the bulls on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 66% buy position and 34% sell volume. The total transaction volume index stood at 1.83 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index was up to read 48.33pts, from the previous day’s 44.41pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Thursday’s trading, the composite NGX All-Share Index gained 204.57 basis points, closing at 96,408.22bps after opening at 96,204.01bps, representing a 0.21% up. Market capitalization rose by N117bn, closing at N55.38tr from the previous day’s N55.27tr, representing a 0.21% value gain.
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This upturn was driven by position taking in the shares of Oando, Julius Berger, Eterna, International Breweries, RT Briscoe and Cornerstone Insurance among others. The impact on Year-To-Date growth was positive as it inched up to 28.93%, while that of Market capitalization jumped to N10.47tr, representing 33.98% above its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Banking and Industrials Goods Indexes closed lower by 0.75% and 0.01% respectively, while the NGX Insurance led the advancers after gaining 1.99%, followed by Consumer goods and Energy with 1.26% and 0.39% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 26:23, while activities in volume and value were up after investors exchanged 966.97 million shares worth N7.42bn. Volume was driven by trades in Conhall Plc, FBNH, Accesscorp, Prestige Assurance and Universal Insurance.
Oando and Julius Berger were the best performing stocks, gaining 9.98% and 9.97% respectively, closing at N69.95 and N172.60 per share respectively on the back of market forces and expectations respectively. On the flip side, SCOA and Japaul Gold lost 9.79% and 7.41% respectively, closing at N1.75 and N2.50 per share, purely on profit taking.
Market Outlook
We expect mixed sentiment as August set for losses on profit taking and sector rotation as market remain on 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
