Market Update for September 2
The first trading session of the month of September and the new week started positively on the Nigerian Exchange amid buying interest in banking and energy stocks that weighed on the benchmark NGX All-Share index which closed higher on an above average traded volume and positive market internals. This extended the bull transition for a third consecutive session in the face of a mixed sentiment and seeming marginal improvement in macroeconomic data as the August Purchasing Manager index rose to 49.9 points from 49.2 points in July according to the latest Stanbic IBTC report. This signaled a slight expansion in business activities for the period, despite being still below the 50 points threshold. This is therefore an indication that the business environment is yet in contraction in the midst of seeming stable environment and marginal rebound.
The month of September is traditionally associated with high volatility and mixed trends judging by the historical data that shows it is a dicey month on the exchange, creating 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.
The mixed momentum and trend continues to reflect in the market’s dynamics of volatility that creates the needed opportunity to buy low and sell high, especially as most listed companies have become undervalued owing to the recent downtrend in their share prices. The market retracement at above the T-line, but below the 50-Day Moving Average confirms the mixed momentum at recovery phase of the market.
The markup phase of the market impacted the NGX index action, with players picking value stocks at discounted prices in expectation of banks’ interim dividend and scorecards. This is especially true now that corporate numbers reveal the position of many companies on the exchange. The mixed sentiment and recovery are a 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 the oversold state in the market to buy into value and defensive stocks to support rebound any moment from now.
The NGX index’s action trades above the T-line to indicate strength in the market, even as is still 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 rebounding to trade above $80 per barrel at the international market.
Technically, the NGX is on an uptrend in the face of mixed sentiments as revealed by the candlestick formation and momentum indicators. The ADX is looking down at 29.34, while RSI and Money Flow Index were up to read 44.89 and 64.54 points against the previous session 42.14 and 56.24 points respectively. Market players should watch this current trend and trade with caution in the face of funds leaving the market, despite position taking 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 pulled back on Monday to continue its oscillation as it trades at $77.25 per barrel in the midst of weak global demand and looming supply glut as OPEC plan to increase production. 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, Monday’s trading opened in the upside which was sustained throughout the session, despite oscillating on buying interests in some blue-chip companies and profit taking in others, a situation that pushed the NGX’s index to an intra-day high of 96,970.18bps from its lows of 96,579.54bps, before closing above its opening level at 96,793.95bps.
Market technicals for the session were positive and strong with lower volume when compared to the previous session in the midst of breadth favoring the bulls on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 55% buy position and 45% sell volume. The total transaction volume index stood at 0.93 points, just as energy behind the day’s performance was relatively strong as Money Flow Index was up to read 64.54pts, from the previous day’s 56.24pts, indicating that funds entered the market.
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Index and Market Caps
At the close of Monday’s session, the composite NGX All-Share Index gained 214.41 basis points, closing at 96,793.95 basis points after opening at 96,580.01bps, representing a 0.22% up. Market capitalization rose by N123.19bn, closing at N55.60tr from the previous day’s N55.48tr, representing a 0.22% appreciation in value.
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This upturn was driven by position taking in the shares of Oando, Conoil,UBA, Zenith Bank, Wapco, Chams, Cutix and CWG among others. The impact on Year-To-Date growth was positive as it inched up to 29.45%, while that of Market capitalization jumped to N10.89tr, representing 35.80% above its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Insurance and Consumer Goods Indexes closed lower by 2.20% and 0.35% respectively, while the NGX Energy led the advancers after gaining 1.74%, followed by Banking and Industrial goods with 1.09% and 0.05% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 29:26, while activities in volume and value were down after investors exchanged 498.12 million shares worth N11.04bn. Volume was driven by trades in UBA, Zenith Bank, Oando, Accesscorp and Prestige Assurance.
Oando and Industrial Medical Gases were the best performing stocks, gaining 9.95% and 9.85% respectively, closing at N84.55 and N29.00 per share respectively on the back of market forces and expectations respectively. On the flip side, Livestock Feeds and RT Briscoe lost 10% and 9.86% respectively, closing at N2.25 and N3.20 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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- 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
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