Market Update for August 22

The bearish sentiment on the Nigerian Exchange continued on Thursday in the midst of seeming renewed buying interest in insurance stocks and other blue chip companies. Profit taking in other sectors pulled back the benchmark NGX All-Share index to close lower, thereby extending the bear transition for two successive sessions in the face of a low traded volume and positive market breadth. Candlestick formation at the end of the day’s trading revealed a bullish hammer and dragonfly Doji that indicates a reversal chart pattern.

The stock market is a treasure trove of opportunities, and the key to significant gains often lies in discovering hidden gems before they become mainstream sensations, just as the current state of the NGX continued to provide value for discerning investors and smart traders. As the market resist further decline to trade around the strong support level of 95,843.10 and below psychological line of 96,000 is a sign of buy zone opportunities for players who desire to buy into value.

The mixed momentum and sentiment reflects 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 high cap stocks that are facing selloffs due to sector rotations and portfolio rebalancing. This pullback below the 96,000 psychological line, T-line and 50-Day Moving Averages confirms the weakness of momentum and the distribution phase of the market.

Position taking across some major sectors of the market also weighed in on the NGX, creating opportunities for market 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, despite the ongoing economic headwinds as revealed by economic data. 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 rebounding to sell below $80 per barrel at the international market.

On Thursday, Regency Alliance Insurance notified the exchange of its board meeting, while Oando informed the market of its completion of the $783m acquisition of ENI’S subsidiary Nigerian Agip oil company. Airtel Africa continues to update the Exchange of its ongoing share buyback programme, just as Jaiz Bank notified the market of appointment non-executive director, while, MTNN, Cutix 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 rebound in the face of buying sentiments as revealed by the candlestick formation and momentum indicators. The ADX is looking up at 30.96, while RSI and Money Flow Index were down to read 28.66 and 31.73 points against the previous session 29.32 and 35.83 points respectively. Market players should watch this current trend and trade with caution in the face of funds returning to the market, despite profit 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 economic 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 remained steady on Thursday heading to close the week lower and continue its oscillation as it trades at $77.01 per barrel in the midst of   demand concerns and ceasefire talk in the Middle East conflict eased fear 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.

Meanwhile, Thursday’s trading started in the upside before pulling back to oscillate throughout the session on buying interests in blue-chip companies and selloffs in others, a situation that pushed the NGX’s index to an intra-day low of 95,563.21bps from its highs of 95,946.55bps, before closing below its opening level at 95,718.05bps.

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 buying sentiment as revealed by Investdata’s Sentiments Report showing 83% buy position and 17% sell volume. The total transaction volume index stood at 0.74 points, just as energy behind the day’s performance was relatively weak as Money Flow Index was up to read 31.73pts, from the previous day’s 35.83pts, indicating that funds left the market.

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Index and Market Caps

At the end of Thursday’s trading, the composite NGX All-Share Index shed 113.46 basis points, closing at 95,718.05bps after opening at 95,832.29bps, representing a 0.12% drop. Market capitalization fell by N64bn, closing at N54.985tr from the previous day’s N55.05tr, representing a 0.12% value loss.

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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 downturn was driven by profit taking and selloff in BUA Foods, Stanbic IBT, Transcorp Hotel, Eterna, Fidelity Bank and Chams among others. This impacted mildly on Year-To-Date growth inched down to 28.01%. Market capitalization YTD gain up to N10.24tr, representing 33.81% above its opening level for the year.

Bearish Sector Indices

Sectoral performance indexes were in red, except for NGX Insurance Index that closed higher by 0.44%, while the NGX Banking led the decliners after losing 0.82%, followed by Energy and Consumer goods with 0.46% and 0.11% respectively. Just as NGX Industrial goods finished flat.

Market breadth was positive as gainers outnumbered losers in the ratio of 22:17, while activities in volume and value were mixed after investors exchanged 393.62 million shares worth N5.85bn. Volume was driven by trades in Universal Insurance, Chams, Oando, Transcorp and Accesscorp.

Academy Press and Oando were the best performing stocks, gaining 10% and 9.99% respectively, closing at N2.75 and N43.50 per share respectively on the back of market forces and sentiment respectively. On the flip side, Transcorp Hotel and Chams lost 10% and 9.72% respectively, closing at N90 and N1.95 per share, purely on profit taking.

 Market Outlook

We expect mixed sentiment to continue on bargain hunting, 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