Market Update for October 29
The pullbacks and bearish sentiment on the Nigerian Exchange continued Tuesday, ahead of month-end and peak of earnings reporting season, amid the influx of corporate numbers that continue to reveal the state of many listed companies, prompting repositioning among investors and traders. The earnings generally beat market expectations, especially the medium and low stocks, including blue-chips while earnings reports of highly priced stocks were flat and mixed, a situation that sent signals to market players. This is especially true of income investors, ahead of the financial year end where such earnings support payout and price in the short and long run.
The continued selloffs in highly capitalized companies and profit taking in other stocks weighed on the benchmark NGX All-Share index Tuesday as it closed lower, losing more than 1,000 basis points in the first two trading sessions of the week. It was despite the better-than-expected corporate earnings released so far in the midst of above average traded volume and negative market internals that extended the bearish outing to test 98,000 psychological line. More companies are expected to make available their earnings reports before Friday in order to meet statutory deadline and avoid penalty.
As the year gradually winds down, sector rotation and portfolio rebalancing will persist, especially as numbers from the services sector and few others remained outstanding. Okomu Oil Palm, Northern Nigerian Flour Mills, Seplat Energy and Berger Paints announced interim dividend of N2.00, 50 kobo, 3.6cent and 20 kobo respectively. These had given insight to what investors should expect at the end of the current financial year.
The NGX index’s action formed a bottom reversal chart pattern that signaled continuation or reversal of trend, which needs confirmation amid the continued high volatility and uncertainty due to the prevailing high interest rates and yields in the fixed income market instruments.
Corporate Nigeria’s performance disconnected from the gloomy economic situation, reflecting the impact of hyperinflation were all prices for goods and services are galloping due to the ongoing economic reforms of the government. Also, there is ongoing capacity building to capture more market share among these companies, a situation that supported their numbers and reflected in their top and bottom lines in the previous quarters.
Similarly, we cannot underestimate the capacity of earnings news and other factors that drive strength or weakness of any market that are the different dynamics of stock markets technically which require effective strategies to navigate and follow trends profitably.
At the current markdown phase on the NGX, discerning investors and smart traders 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 and weeks 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 97,765.03 basis points and 97,644.48bps after forming a bottoming tail and uptrend candles. This created the perfect setup for high probability swing trade to catch on ahead of financial news that will impact prices.
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 sentiment and somewhat 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. 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 on downtrend in the midst of negative momentum, impressive earnings and improving transacted volume that signaled position taking around strong support levels of 97,802.95bps and 98,000.86, as the market is expecting more corporate numbers to give a clear direction. Just as candlestick formation and momentum indicators had revealed somewhat weakness in the market. As ADX continued to look down at 14.72, while RSI and Money Flow Index were mixed to read 48.36 and 61.79 points against the previous session 55.62 and 58.09 points respectively.
Market players should watch this current trend and trade wisely in the face of funds entering the market on selling sentiment in some sectors and buying interest in others. Also, trading volume pattern continued to oscillates, suggesting position taking and selloffs in the market amid players digesting earnings reports released so far 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, trading at $71.26 per barrel in the midst of increased US inventory and lingering conflict in the Middle East with exchange of heavy fire between Israel and Hezbollah worrying the markets about supply. Also, demand outlook in the midst of rate cuts by the major central banks of the world. 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 upside before pulling down to oscillate for the rest of the session on selloffs in highly priced stocks and blue chip companies, while position taking hits some other stocks. This situation pulled the NGX’s index to an intra-day low of 98,000.86bps from its highs of 98,851.11bps, before closing below its opening level at 98,058.07bps.
Market technicals were negative and mixed with higher volume when compared to the previous session in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 7% buy position and 93% sell volume. The total transaction volume index stood at 0.94 points, just as impetus behind the day’s performance was strong as Money Flow Index inched up to read 61.79pts, from the previous day’s 58.09pts, indicating that funds entered the market, despite closing in red.
To successfully invest and trade in this volatile market for the rest of the year, order for Investdata’s video on Buy & Sell Technical Analysis Toolbox to navigate the volatile market profitably, enhance trading decisions and boost your bottom line. Also, to up your game in stock trading and investing, understanding the key to trading price and index action will go a long way to make the difference in your trading results, check out the video materials above and take action.
Index and Market Caps
At the end of Tuesday’s trading, the benchmark NGX All-Share Index lost 650.83bps closing at 98,058.07 basis points after opening at 98,708.90bps, representing a 0.66% decline. Market capitalization fell by N394.40bn, closing at N59.42tr from the previous day’s N59.81tr, representing a 0.66% 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 Aradel, BUA Cement, Accesscorp, Transcorp Plc, GTCO, Zenith Bank, Academy Press, Cadbury Nigeria and Honeywell Flour Mills, among others. This impacted negatively on Year-To-Date gain as it fell to 31.14%, while Market capitalization gain stood at N15.12tr, representing 45.85% growth over its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Insurance and Energy index closed higher by 0.18% and 0.03% respectively, while the NGX Banking led decliners after losing 1.46%, followed by Industrial and Consumer goods with 0.33% and 0.01% respectively.
Market breadth was negative, as losers outnumbered gainers in the ratio of 32:26, while activities in volume and value were up after investors exchanged 399.32 million shares worth N8.93 bn. Volume was driven by trades in UBA, Chams, Transcorp, Zenith Bank and Accesscorp.
NNFM and EUNISELL were the best performing stocks, gaining 10% and 9.87% respectively, closing at N37.40 and N4.23 per share respectively on the back of interim dividend of 50 kobo and market forces respectively. On the flip side, Cadbury and Academy Press lost 9.89% and 9.87% respectively, closing at N16.40 and N2.83per share, purely on negative earnings and profit taking.
Market Outlook
We expect mixed sentiment to continue on profit taking and positioning, ahead of more Q3 earnings reports. 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
