Market Update for October 8

Bearish sentiments resurfaced on the Nigerian Exchange Tuesday, halting two previous trading sessions of recovery, as profit taking hit banking stocks and some blue chip companies. This weighed on the benchmark NGX All-Share index pulling it lower on a high traded volume amid negative market internals. The decline and markup phase reveals the strength or weakness of the market which are different dynamics of stock markets technically that require effective strategies to navigate and follow trends.

Tuesday’s mixed session was attributed to continued portfolio rebalancing in the face of the subsisting higher interest rate now driving funds into less risky investment windows like fixed deposits, bonds and commercial papers. Also, some investors are looking the way of the October FGN saving bond offered by Debt Management Office during the session. Also, discerning market players are repositioning their portfolios along sectors and companies with potentials to release positive numbers on the strength of their earnings power ahead of the Q3 earnings reporting season. Also, early filers are expected to kick start earnings season next week, with focus on September inflation reports from the National Bureau of Statistics. These numbers are likely to guide investing public decision ahead of CBN policy meeting in November.

Historically, and in technical analysis, trends or patterns repeat themselves. This last quarter of the year 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 96,702.26bps after forming a bottoming tail and uptrend candles. This created the perfect setup for high probability swing trade to catch on ahead of earnings news that will impact prices.

During the session, more than ten companies notified the exchange of their closed periods and board meeting dates to approve their scorecards this month. However, the low valuation and high dividend yield of some companies due to profit taking and pullbacks are creating opportunities for new entrants who understand the big picture and market dynamics at this season. During the session also, petroleum products marketing giant- Conoil Plc released its corporate action of N3.50 dividend for the 2023 financial year

The NGX index’s action is still weak and trading below the T-line and 50-EMA, while above 50-SMA to indicates profit booking and 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 $79 per barrel at the international market.

Technically, the NGX is oscillating, expecting a trigger to give direction, which state of corporate and economic numbers will determine.  As these reports hits the market any moment from next week.  Candlestick formation and momentum indicators had revealed strength returning to the market. As ADX inched down at 21.44, while RSI and Money Flow Index were down to read 48.78 and 46.62 points against the previous session 50.23 and 55.36 points respectively. Market players should watch this current trend and trade with caution in the face of funds leaving the market on mixed sentiment in some sectors and profit taking in others. Also, trading volume pattern continued to oscillates, suggesting buying interest and selloffs in the market amid players looking forward to earnings reports and policy direction of economic managers.

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 Tuesday pulled back to continue its oscillation, as it trade at $77.47 per barrel in the midst of spike in US inventory and  fear of supply shock in the wake of continued  conflict in the  middle east. Also, soft demand from China and outlook of further rate cut in the last Fed policy meeting for the year come November. 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 started in the upside before pulling back to oscillate for the rest of the session on profit taking and buying interest in some companies shares. This situation pushed the NGX’s index to an intra-day low of 97,323.51basis points from its highs of 97,899.50bps, before closing below its opening level at 97,584.81bps.

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 mixed sentiment as revealed by Investdata’s Sentiments Report showing 45% buy position and 55% sell volume. The total transaction volume index stood at 0.55 points, just as impetus behind the day’s performance was relatively strong as Money Flow Index was fell to read 46.62pts, from the previous day’s 55.36pts, indicating that funds left the market.

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Index and Market Caps

At the end of Tuesday, the NGXASI shed 121.89 basis points closing at 97,584.81bps after opening at 97,706.70bps, representing a 0.12% drop. Market capitalization fell by N70bn, closing at N56.08tr from the previous day’s N56.15tr, representing a 0.12% 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.

The downturn was driven by profit taking and selloffs in MTNN, Oando, GTCO, UBA, NB, Guinness and International Breweries among others. This expectedly had negative impact on Year-To-Date gain which slide to 30.51%, while Market capitalization was up to N11.45tr, representing 37.05% above its opening level for the year.

Mixed Sector Indices

Sectoral performance indexes were mixed with the NGX Consumer Goods and Banking index closing 1.73% and 0.50% lower respectively, while the NGX Energy index led advancers after gaining 1.98%, followed by  Insurance and Industrial goods  with 0.86% and 0.01% respectively.

Market breadth was negative as losers outnumbered gainers in the ratio of 29:24, while transactions in volume and value were mixed after investors exchanged 719.11 million shares worth N8.34bn. Volume was driven by trades in Wapic, Fidelity Bank, Accesscorp, UBA and Veritas Kapital.

Regency Insurance and PZ were the best performing stocks, gaining 10% and 8.78% respectively, closing at N0.55 and N19.20 per share respectively on the back of market forces and expectations respectively. On the flip side, Guinness and Africa Prudential lost 10% and 9.86% respectively, closing at N61.20 and N9.60per share, purely on profit taking.

Market Outlook

We expect mixed sentiment to continue on profit booking, buying interests and portfolio rebalancing ahead of the 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