Mixed Sentiment Still, As Investors Eye Sound Stocks Ahead Of Dividends, Inflation Data, MPC Outcome

Market Update for February    12

The Nigerian Exchange extended its positive outing as the week started Monday, amid buying momentum in some sectors and highly priced stocks which pushed the benchmark NGX All-Share index higher on a low traded volume and positive market breadth. All eyes are on the January consumer price index expected to hit the market this week, revealing the true position of yields in the fixed income market. This is as investors continue their portfolio rebalancing in the face of increase in Treasury Bills’ rates, as selloffs hit the bond market for Treasury Bills due to the disposition of CBN with a likely hike in the Monetary Policy Rate (MPR). This is as part of moves to attract foreign portfolio investments and boost the nation’s US Dollar inflows, even at the disadvantage of economy.

Investors continue to reassess the latest opportunities in money market instruments as early filers start hitting the market with their earnings and corporate actions.

Timing at this period is very important, knowing how long it will take to achieve the expected returns in form of yields, capital gain and dividend income. The NGX index’s action rebounded to trade on top of the T-line, confirming consolidation and distribution phase that can lead to markup or markdown depending on market forces, ahead of the 20-Day Moving Average. The correction and mix trend in February will continue before another rebound on the strength of audited earnings reports and dividend season in the midst of volatility. However, double bottom chart pattern may trigger reversal or continuation of trend which needs confirmation as trading opens.

The NGX witnessed buying sentiment in the midst of continued sector rotation and portfolio repositioning after the pullbacks had created opportunity for dividend players to position ahead of the company’s results. Investors should watch out for the value areas of resistances and supports levels as more earnings hitting the market any moment from now. Index action has displayed a mixed picture as market players eagerly await numbers from the companies, following the optimism that was fueled by the belief that the impressive performance from the financial sector. There is also the growth prospect of the economy in the face of rising macroeconomic headwinds that will support rebound and revaluation of assets in 2024.

The equity market is a leading indicator of the economy, as such all eyes are still on the fiscal and monetary authorities for a clear direction of where the economy is heading, given developments in the global economy, especially the sustained geopolitical tensions in the Middle East and Eastern Europe. There is also the fear of a recession, among other issues that will continue to influence investment decisions, while driving volatility. The NGX index’s action remains above the T-line on daily basis in the midst of high volatility and positive momentum to trade above the short and long term Moving Averages on the daily, weekly and monthly time frame. Portfolio rebalancing on the exchange continued in the face of earnings season and volatility.

The candlestick formation at the end of Monday trading revealed a reversal or continuation of uptrend, depending on market forces and sentiments.  Therefore, market players should 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 index’s action is still at overbought state with bearish money flow divergent which a topping chart pattern that signal correction.

The weakness of momentum indicators continue, even as the market extended its two successive session of bull transition to remain in the overbought region, with ADX looking down to read 72.68, while RSI and Money Flow Index are mixed at 72.27 and 64.20 points against the previous session 71.97 and 66.16 points respectively. This should be a concern for investors and smart traders as they trade with caution because funds are leaving the market. The trading volume pattern suggests hold and watch disposition of market players, as traders reduce position in some sectors in the face of others investment windows returns remain below inflation and negative.  Also, the anticipated financial market and economic reset in 2024, comes with challenges and huge opportunities to create wealth for smart investors and traders.

To navigate the rest of the quarter 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 price extended its gains on Monday to continue its oscillation, as it trades at $82.32 per barrel in the midst of expected inventories reports from US and escalating Middle East conflict, while Ukraine and Russia war persists in the face of fear of Russia attacking Norway’s oil and gas installations.  This rising geopolitical tension across the globe is also a major threat to many economies and the commodity market. Also, oil supply increase by OPEC and others impact oil price as it continued to oscillate. This trend may likely continue in 2024, this up and down movement of oil price also continues to drive volatility.

Monday’s trading opened in the green and was sustained despite oscillating for the rest of the session on position taking across low, medium and large cap stocks. Just as profit taking and selloffs hit some stocks, a situation that pushed the NGX’s index to an intraday high of 102,134.83 basis points, from its lows of 101,703.30bps, before closing above its opening figure at 102,042.32bps.

Market technicals were positive and mixed, as volume was lower 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 79% buy position and 21% sell volume. The total transaction volume index stood at 0.31 points, just as energy behind the day’s performance was relatively strong as Money Flow Index is  looking  down at 64.20pts, from the previous day’s  66.16pts, indicating that funds left the market, despite closing in the green.

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Index and Market Caps

The benchmark NGXASI gained  183.95bps, closing at 102,042.32 after opening at 101,858.37bps, representing a 0.18% up, just as market capitalization rose by  N100.66bn, closing at N55.84tr from the previous day’s N55.74tr, which also represented a 0.18% value gain.

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 overbought range has just increased to 60 as they rallied to new highs that call for caution 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 upturn was driven by position taking in the shares of Geregu, BUA Foods, Ucap, Zenith Bank, Fidelity Bank, NB, Cornerstone, Chams and Eterna, among others, which impacted positively on Year-To-Date gain as it inched up to 36.47%. Market capitalization YTD gain stood at N14.85tr, representing 36.48% above its opening level for the year.

Mixed Sector Indices

The sectoral performance indexes for the session were mixed, as NGX Banking and Industrial  index  closed lower by  0.88% and 0.07% respectively, while, NGX Insurance led the advancers after gaining 2.30% followed by Consumer goods and Energy  with  0.60% and 0.15% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 31:23, while transactions in volume and value were down after players exchanged 242.43m shares worth N5.13bn. Volume was driven by trades in, Accesscorp,  Veritas Kapital, GTCO, FBNH and Transcorp.

NCR and Chams were the best performing stocks, gaining 10% each, closing at N4.40 and N2.75 per share respectively on market forces and sentiments.  On the flip side, Infinity Trust Mortgage Bank and John Holt lost 9.90% and 9.88%, closing at N7.19 and N2.19 per share, purely on selloffs.

Market Outlook

We expect mixed sentiment to continue as investors target strong fundamentally sound companies with dividend expectation and growth prospect in the new financial year amidst  volatility ahead of January CPI and upcoming policy meeting, while pullback at this point will add more strength to upside potential. As such, 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




Tel: 08028164085, 08179547605