Market Update for September 4
Profit booking resurfaced on the Nigerian Exchange at the midweek as trader’s cashed out their gains from the recent upbeat or recovery, led by players in the oil and gas sector. This happening in the midst of impressive half-year scorecards of interim dividend paying banks, as they announce interim dividend higher than what they paid in the previous year, judging from those results already published. Profit taking across the major sectors of the market weighed on the composite NGX All-Share Index to close lower and thereby halting the four sessions of bull transition on a low traded volume and negative market internals.
The weak market or pullback at midweek was expected after being upbeat and forming a top reversal chart pattern that indicates pullback. As revealed by historical data, this month is a very dicey one with high volatility and mixed trends that creates buy opportunities for market players who understand the big picture of equity investment and its dynamics in any condition that may arise. The month has so far recorded a down market in 15 years, and closed green 11 times in 26 years. 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.
Transforming risk into reward comes with understanding what you are doing, not what you are thinking, because market’s dynamics at any cycle provides opportunity to buy low and sell high, especially as most listed companies have become undervalued owing to the recent oscillations of uptrend and pullbacks in their share prices. The market retraced back to test the T-line, but below the 50-Day Moving Average confirms the mixed momentum at distribution phase of the market.
The distribution phase of the market impacted the NGX index’s action, with players picking value stocks at discounted prices in expectation of more banks’ interim dividend and earnings. This is especially true now that corporate numbers reveal the position of many companies on the exchange. The mixed sentiment and recovery are different phase of the market that requires a change in strategies to navigate and follow the trend. It is expected that smart money will take advantage of correction and oversold state in the market to buy into value and defensive stocks to support rebound any moment from now.
Despite midweek’s pullback, the NGX index’s action still rests on the T-line to indicate somewhat weakness in the market, even as is 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 trading below $80 per barrel at the international market.
Technically, the NGX is down in the face of selling sentiments and profit taking as revealed by the candlestick formation and momentum indicators. The ADX is looking down at 27.36, while RSI and Money Flow Index were down to read 42.35 and 68.78 points against the previous session 45.92 and 69.95 points respectively. Market players should watch this current trend and trade caution in the face of funds leaving the market on selloffs 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 at midweek edged up to continue its oscillation as it trades at $72.94 per barrel in the midst of OPEC delaying production hike and US inventories declining. Even with expected rate cut by Fed in September which will marginal. 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, trading opened in the red and was sustained for the rest of the session, despite oscillating on profit taking in some blue-chip companies and buying interest in others, a situation that pushed the NGX’s index to an intra-day low of 96,525.21 basis points from its highs of 96, 836.49bps, before closing below its opening level at 96,537.48bps.
Market technicals for the session were negative and mixed with lower volume when compared to the previous session in the midst of breadth favoring the bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 4% buy position and 96% sell volume. The total transaction volume index stood at 0.73 points, just as impetus behind the day’s performance was relatively strong as Money Flow Index was down to read 68.78pts, from the previous day’s 69.95pts, indicating that funds left the market.
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Index and Market Caps
At the end of trading, the benchmark NGX’s All-Share Index shed 336.26 basis points, closing at 96,537.48 basis points after opening at 96,873.74bps, representing a 0.35% decline. Market capitalization fell by N193bn, closing at N55.45tr from the previous day’s N55.65tr, representing a 0.35% depreciation in value.
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This downturn was driven by profit taking in the shares of Oando, Ucap, Dangote Sugar, FBNH, Zenith Bank, Wapco, Cornerstone and NB among others, impacting negatively on Year-To-Date gain which reduced to 29.11%. That of Market capitalization equally slowed to N10.57tr, representing 35.52% above its opening level for the year.
Bearish Sector Indices
Sectoral performance indexes closed red, led by the NGX Insurance index which shed 1.13%, followed by Banking, Energy, Consumer and Industrial goods with 0.89%, 0.66%, 0.24% and 0.02% respectively.
Market breadth was negative as losers outnumbered gainers in the ratio of 31:21, while activities in volume and value were down after investors exchanged 389.23 million shares worth N8.18bn. Volume was driven by trades in Oando, Universal Insurance,Transcorp and FTN Cocoa.
Daar Communication and Industrial Medical Gases were the best performing stocks, gaining 10% and 9.72%, closing at N0.66 and N35.00 per share respectively on the back of market forces and expectations respectively. On the flip side, Oando and RT Briscoe lost 10% and 9.72% respectively, closing at N81.90 and N2.60 per share, purely on profit taking.
Market Outlook
We expect mixed sentiment on bargain hunting in banks interim dividend paying stocks in expectation of their half year numbers and sector rotation as the market recovers. 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.
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Sub-Topics
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- Discovering Support and Resistance Levels On NGX with Candlestick Patterns For Profitable Trading,
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- Importance of Numbers in Profitable Trading & Stock Picks
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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
08028164085
