Market Update for November 5
Trading activities on the Nigerian Exchange on Tuesday halted six previous consecutive sessions of bear transition on a rekindled demand for banking stocks and other blue chip companies. This impacted the benchmark NGX All-Share index positively in the midst of high volatility and continued sector rotation among market players on the strength of Q3 corporate numbers.
Market rebound was due to buying opportunities created by the recent pullbacks and corrections as discerning investors and smart traders took advantage of the persisting low valuation to position in undervalued stocks with high upside potentials, especially as they digest the recently submitted quarterly earnings reports that revealed the states of the various companies on the NGX. Already, many companies reported better than expected Q3 numbers that reveal value with high possibility of higher payout at the end of the current financial year as market players continue to interpret these earnings, while rebalancing their portfolios.
Notwithstanding the ongoing price correction that hit highly priced stocks and some blue chip companies, weighing on the general market, strength is gradually returning to the NGX on the back of a high traded volume. These was also the impact of positive market internals as the index resisted further decline, retracing up after breaking down various psychological lines of 99,000, 98,000 and 97,000 mark before rebounding. The index has formed a bullish hammer reversal chart pattern that signals an uptrend after the markdown phase, which needs confirmation as trading opens at midweek.
As the year 2024 winds down, sector rotation and portfolio rebalancing will persist, especially as numbers from the services sector and few others remain outstanding. Market reactions to the impressive earnings supported the NGX to signal reversal with position taking in banking stocks and others like Conoil, PZ, Johnholt and Julius Berger. The September earnings should give insight to what investors should expect at the end of the current financial year from different sector and companies.
At the current accumulation phase on the NGX, market players are repositioning their portfolios along sectors and companies with potentials to release positive numbers on the strength of their earnings power at the end of Q4. Also, seasonal trends are likely to repeat themselves in these last months of the year which comes with seasonality and sentiment that makes it very important to market players across the globe. This is especially as retracement from strong support level of 96,684.90 basis points and 96,597.70bps after forming a bottoming tail and uptrend candles. This created the perfect setup for high probability swing trade to catch end of year repositioning.
The NGX index’s action trades below the T-line and above the two moving averages of 50-EMA and 50-SMA, this indicate weak momentum and somewhat in the midst of changing market fundamentals and technical as reflected at the end of Tuesday trading. 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. 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 trading below $75 per barrel at the international market.
Technically, the NGX is set to rebound in the midst of buying sentiment, impressive earnings and improving transacted volume that signaled position taking around strong support levels of 96,597.79bps and 96,674.35bps. Just as candlestick formation and momentum indicators had revealed somewhat weakness and return of strength slowly in the market. As ADX is looking up at 19.19, while RSI and Money Flow Index were mixed to read 40.45 and 29.95 points against the previous session 37.62 and 31.14 points respectively. Market players should watch this current trend and trade wisely in the face of funds leaving the market on buying sentiment in some sectors and selloffs in others. Also, trading volume pattern continued to oscillates, suggesting position taking and selloffs in the market amid players digesting the corporate earnings and policy direction of economic managers.
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Oil prices on Tuesday slide down to continue its oscillation, trading at $74.49 per barrel in the midst of spike in US inventory and stronger dollar, even as US election is ongoing and conflict in the Middle East. Also, demand outlook in the midst of rate cuts by the major central banks of the world and OPEC delaying output increase to January 2025. The rising geopolitical uncertainties across many economies remains a threat to the global economy and energy consumption. 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 slight green and it was sustained throughout the session, despite oscillating on selloffs in some stocks and buying interest in blue chip companies. This situation pushed the NGX’s index to an intra-day high of 97,124.57bps from its lows of 96,597.70bps, before closing above its opening level at 97,123.61bps.
Market technicals were positive and strong with higher volume when compared to the previous session in the midst of breadth favoring the bulls on a buying pressure as revealed by Investdata’s Sentiments Report showing 100% buy position and 0% sell volume. The total transaction volume index stood at 1.14 points, just as impetus behind the day’s performance was weak as Money Flow Index inched down to read 29.95pts, from the previous day’s 31.14pts, indicating that funds left the market, despite closing in green.
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Index and Market Caps
The NGX All-Share Index gained 215.88 basis points, closing at 97,123.61bps, after opening at 96,907.73bps, representing a 0.22% up. Market capitalization rose by N103.79bn, closing at N58.85tr from the previous day’s N58.72tr, representing a 0.22% appreciation in value.
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Tuesday’s upturn was driven by position taking and accumulation of UBA, PZ, NGXGroup, Zenith Bank, Accesscorp, FCMB, FBNH and Conoil, among others. This impacted mildly on Year-To-Date gain as it inched up to 29.89%, while Market capitalization gain stood at N14.65tr, representing 44.15% growth over its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Banking and Energy index closed higher by 3.16% and 1.55% respectively, while the NGX Insurance led decliners after losing 1.33%, followed by Industrial and Consumer goods with 0.06% and 0.05% respectively.
Market breadth turned positive, as gainers outnumbered losers in the ratio of 26:21, while activities in volume and value were up after investors exchanged 3.6bn shares worth N25.57bn. Volume was driven by trades in UBA, Zenith Bank, Veritas Kapital, Julius Berger and NB.
Conoil and JohnHolt were the best performing stocks, gaining 9.93% and 9.92% respecitively, closing at N208.10 and N3.99 per share respectively on the back of impressive earnings and market forces respectively. On the flip side, Oando and Daarcom lost 9.98% and 9.68% respectively, closing at N72.65 and N0.56per share, purely on selloffs and profit taking.
Market Outlook
We expect mixed sentiment to continue on low valuation, profit taking and positioning. Also, sector rotation and portfolio rebalancing continues in the market, 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
