Market Update for October 3 

The bearish sentiment on the Nigerian Exchange continued Thursday amid selloffs in highly priced stocks and blue chip companies which weighed heavily on the benchmark NGX All-Share Index on a low traded volume and negative market breadth. This extended the pullbacks and correction ahead of the Q3 earnings reporting season, even as the Purchasing Managers’ Index for the month of September slipped to 49.2 points from 49.8 points in August, indicating a contraction in business activities for the period. This should be expected, being an impact of continued rates hike by the monetary authority at the detriment of economy expansion in the name of attracting foreign flow.

Market pullbacks and decline phases are different dynamics of stock markets technically that require effective strategies to navigate and follow trends. The breadth contraction continues, as many stocks are selling below their 52-week high at the beginning of this last quarter of the year, thereby creating opportunities to buy into undervalued and defensive stocks that would support a rebound with all eyes on the Q3 numbers and other macroeconomic data.

Historically, and in technical analysis, trends or patterns repeat themselves. The new quarter comes with seasonality and sentiment that makes it very important to market players across the globe. This is especially as we are expecting a retracement from strong support level  of 96.843.10 basis points and 96,151.89bps after forming a bottoming tail and range expansion bar. This created the perfect setup for high probability swing trade to catch on.

During the session, more companies notified the exchange of their closed periods and board meeting dates to approval their scorecards in the new month of October. The pullbacks by some companies due to profit taking and portfolio reshuffling creates another opportunity for new entrants who understand the big picture and market dynamics at this season.

The NGX index’s action is bearish and weakness trading below the T-line and the two moving averages of 50-EMA and 50-SMA that indicates correction or pullbacks 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, despite the seeming slowdown inflation and mixed macroeconomic data. 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 above $77 per barrel at the international market.

Technically, the NGX is witnessing selloffs and expecting another trigger to reverse up and breakout the recent resistance levels, on the strength of the expected Q3 corporate numbers which will determine the next direction as these scorecards start hitting the market any moment from next week.  Candlestick formation and momentum indicators had revealed the state of the market. As ADX inched up at 21.47, while RSI and Money Flow Index fell to read 43.28 and 56.47 points against the previous session 56.37 and 62.15 points respectively. Market players should watch this current trend and trade with caution in the face of funds leaving the market on selling sentiment in some sectors and position taking in others. Also, trading volume pattern continued to oscillates, suggesting buying interest and selloffs in the market amidst players looking forward to corporate and economic 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 on Thursday went up sharply to continue its oscillation, as it trade at $77.76 per barrel in the midst of escalating middle conflict and impact on supply, despite the rising US inventories. As OPEC assure of supply even when Iranian supply is affected by any attack on its oil facilities. 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.

Thursday’s trading started slightly in the green before pulling back sharply and it was sustained for the rest of the session, despite oscillating on selloffs in Dangote Cement and others, while positioning taking in some stocks.  This situation pushed the NGX’s index to an intra-day low of 96,684.90basis points from its highs of 98,277.63bps, before closing significantly below its opening level at 97,064.42bps.

Market technicals for the session were negative and mixed with lower volume when compared to the previous session in the midst of breadth that favour the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 24% buy position and 76% sell volume. The total transaction volume index stood at 0.55 points, just as energy behind the day’s performance was relatively strong as Money Flow Index was fell to read 56.47pts, from the previous day’s 62.15pts, 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 lost 1,167.97bps closing at 97,064.42bps after opening at 98,232.39bps, representing a 1.19% decline. Market capitalization fell by N671.16bn, closing at N55.78tr from the previous day’s N56.45tr, representing a 1.19% 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 volatility call for intelligent  trading 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.

Meanwhile, the day’s downturn was driven by profit taking and selloffs  in the shares of  Dangote Cement, CWG, FBNH, UBA, Dangote Sugar and Cutix among others, which impacted negatively on Year-To-Date gain as it dropped  to 29.81%, while Market capitalization inched down to N10.89tr, representing 36.31% above its opening level for the year.

Mixed Sector Indices

Sectoral performance indexes were mixed with the NGX Energy and Insurance index closing 3.80% and 2.00% higher respectively, while the NGX Industrial Goods index expectedly led decliners after losing 5.96%, followed by Consumer goods and Banking with 0.20% and 0.03% respectively.

Market breadth was negative as losers outnumbered gainers in the ratio of 27:23, while activities in volume and value were down after investors exchanged 268.39m shares worth N6.76bn. Volume was driven by trades in UBA, Zenith Bank, Deap Capital, SterlingNG and Caverton.

Seplat Energies and Livestock Feeds were the best performing stocks, gaining 10% and 9.93% respectively, closing at N4, 513.40 and N2.99 per share respectively on the back of market forces and expectations respectively. On the flip side, Dangote Cement and NSLTech lost 10% and 7.58% respectively, closing at N478.80 and N0.61per share, purely on profit taking and selloffs.  

Market Outlook

We expect mixed sentiment to continue on profit taking and portfolio rebalancing ahead of Q3 earnings reporting session. Also, sector rotation 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