Market Update for August 13 

Bearish sentiments continued Tuesday on the Nigerian Exchange, with the composite NGX All-Share index closing lower after an intraday oscillation in the midst of above average traded volume and negative market internals. Also, all eyes are on the expected July consumer price index report and interim dividend from first-tier banks, even as profit taking in blue companies prevails, just as selloffs in highly capitalized stocks continued to pull down the NGX after a short rebound.

Weak momentum and sentiment persisted as reflected in the market dynamics of volatility that creates the needed opportunity to buy low and sell high, especially as most of the listed companies are undervalue and the pullbacks are driven by high cap stocks that are facing selloffs as a result of sector rotation and portfolio rebalancing. This pullback below the 98,000 psychological line, T line and 50-Day Moving Averages confirms weakness of momentum and distribution phase of the market.

Profit taking across the major sectors of the market had also weighed in on the NGX, thereby creating opportunities for market players to pick value stocks at discounted prices. This is especially now that corporate numbers reveal the position of many companies on the exchange, despite the ongoing economic headwinds. The selling sentiment and pullback are a different phase of market that requires change in strategies to navigate and follow the trend.

However, it is expected that smart money will take advantage of the oversold state in the market to buy into value and defensive stocks, as numbers released so far have been mixed, while earnings of low cap stocks and some highly capitalized companies beat market expectations. This is especially true of service providers like banks, insurance and others in the face of low valuation and pullbacks witnessed in the market recently. The market continues to trade within the value area, creating entry opportunities for discerning investors and smart traders, even as transaction volume patterns and support levels signal the ‘buy zone’ ahead of July consumer price index and banks interim dividend announcement. This pullback may not last on the strength of earnings power of many undervalue and growth stocks.

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 rebounding to sell above $80 per barrel at the international market.

During Tuesday’s session more companies notified the exchange of their Annual General Meetings. The latest came from FBN Holdings, while Airtel Africa continues to update the Exchange of its ongoing share buyback programme. Also, Accesscorp notified the market of extension of its right issue offer and delay of its half-year earnings report. Also, Ucap and Initiates 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 just signaled weak momentum in a pullback with selling sentiments as revealed by the candlestick formation and momentum indicators. The ADX is looking down at 29.45, while RSI and Money Flow Index were down to read 38.37 and 19.31 points against the previous session 41.97 and 19.31 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 half year 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 dropped on Tuesday to continue its oscillation as it trades at $81.20 per barrel in the midst of ongoing Middle East tension and OPEC supply curbs, as concern about economic growth and future demand weighed on oil prices. 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, Tuesday’s trading opened in the upside before pulling back to oscillates for the rest of session on profit taking and buying interest in blue chip companies, a situation that pushed the NGX’s index to an intra-day low of 96,984.43bps from its highs of 98,341.34bps, before closing below its opening level at 97,390.01bps.

Market technicals for the session were negative 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 30% buy position and 70% sell volume. The total transaction volume index stood at 0.91 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index was down to read 19.12pts, from the previous day’s 19.31pts, indicating that funds left the market.

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Index and Market Caps

At the end of Monday’s trading, the key performance Index shed 490.93 basis points, closing at 97,390.01bps after opening at 97,881.75bps, representing a 0.50% decline. Market capitalization fell by N278bn, closing at N55.30tr from the previous day’s N55.57tr, which also represented a 0.50% value loss.

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.

The session downturn was driven by profit taking and selloffs in BUA Cement, Zenith Bank, GTCO, Oando, UBA, Linkage Assurance and Veritas Kapital among others. This impacted negatively on Year-To-Date growth reduced to 30.49%. Market capitalization YTD gain fell to N11.32tr, representing 36.62% above its opening level for the year.

Bearish Sector Indices

Sectoral performance indexes were down, except for NGX Consumer Goods that  closed higher by 0.82%, while NGX Banking index led the declincers after losing 1.92%, followed by Insurance, Industrial  goods and Energy  with 1.47%, 1.22% and 0.13% respectively.

Market breadth was negative as losers outnumbered gainers in the ratio of 29:25, while activities in volume and value were up after investors exchanged 4983m shares worth N11.8bn. Volume was driven by trades in GTCO, Japaul Gold, Accesscorp, Veritas Kapital and Oando.

Neimeth Pharm and Champion Breweries were the best performing stocks, gaining 9.90% and 9.75% respectively, closing at N2.11 and N3.04 per share respectively on the back of market forces and sentiment respectively. On the flip side, Oando and Livestock Feeds lost 9.97% and 8.10% respectively, closing at N114.30 and N24.40 per share, purely on profit taking and selloffs.

 Market Outlook

We expect mixed sentiment and bargain hunting to continue on profit taking and sector rotation amidst oversold region. Portfolios repositioning is however continuing, as investors take 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