Market Update for October 4
Trading on the Nigerian bourse for the first day in the last quarter of the year 2022 closed negative, as market players continued their reactions to the recent rate hike, which resulted in the Central Bank of Nigeria (CBN) debiting banks in the country to the tune of over N188bn in line with the new Cash Reserve Ratio (CRR) of 32.5%, triggering selloffs in banking stocks. We recall that the sector had recent attracted buying interests due to the relatively undervalued state of the stocks, and their low price to earnings ratio that reflected the improved earnings in the midst of market volatility and correction.
The NGX index’s action on Tuesday, following the public holiday declared by the Federal Government to mark the nation’s 62nd Independence Day, gave up at its critical support levels, breaking down the 49,000 psychological line. This was on an above average traded volume and negative market breadth to close lower in the midst of selling sentiment and weak momentum. The bear resurgence wiped out previous session’s gains amid the continued portfolio reshuffling and sector rotation ahead of the Q3 earnings reporting season. Already, over 60% of listed companies have notified the exchange of their closed period and board meetings dates to consider and approve the financials for the quarter-ended September 30, 2022.
The power of perception or sentiment cannot be overemphasized in stock trading or investing, seeing the impact of expected slowdown in aggressive hawkish monetary policy across the globe, on stock prices in mature markets and others looking up since the beginning of the week and quarter. UK experience coming after World Bank and IMF had continued to warn the central banks to rethink and avoid pushing the global economy into recession. We see that is already happening in UK, China, Japan and others. It is time for the Nigerian central bank and its Monetary Policy Committee to have a rethink before things goes out of hand.
The low valuation of NGX, high earnings and dividend yields on improved earnings released so far in the year, coupled with the expectation of third quarter corporate earnings to shape the market direction in the face of inflation hitting 17 years high above 20%, causing many players stay on the fence, waiting to confirm direction before jumping in, as outlook for the economy and the financial market remains unpredictable.
Despite the lingering high interest rates atmosphere, rising inflation and slowing industrial output as a result of policy changes and uncertainty around the globe, there are sectors, industries and individual stocks that are still seeing positive activities from traders and investors. There are stocks players should pay attention to, as the correction in the NGX index action create buying opportunity in some sectors and individual defensive stocks with high dividend high yield and positive earnings growth.
Market internals are revealing the hidden forces that work for both short and long-term traders to get into the best position and allow you to stay in them for maximum profit, despite the market rebounding or weaken further. The market’s internals that measure the forces behind the advancers and associated volume of the uptick or downtick. These two ratios tell you everything you need to know to predict future price movements. So, the volume pattern and index structure in recent sessions show position taking, while funds enter some stocks as revealed by money flow index which need to be confirmed, especially as negative sentiment supported the previous session candlestick formation.
In the current decline phase of the market, the decision of when to buy or sell individual stocks or an index, is always based on price actions and the money flow direction which combines price and volume. We only want to hold stocks that are increasing, or at least retaining their value, while avoiding equities that are on the decline, and the toolset to evaluate price action is technical analysis.
To navigate the rest of the month profitably using fundamental and technical analysis to run, join investdata live sessions at noon every 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 mixed sentiment witnessed, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”
Oil price continued its oscillation, as it rebounded powerfully to trade at $90.53 on proposed output cut by OPEC in their meeting today, in the midst of recession fear and supply tighten due to Russia Ukraine war. Despite the weak demand and fear of recession around the globe on hawkish monetary policy by central banks, just as China COVID-19 lockdown come to an end. The up and down movement of oil price also continues to drive volatility in the face of rising interest rates and inflation. Despite the bailout package of the Chinese government to simulate economic activates and stable employment, as well as that of Germany aimed at managing the energy crisis.
Monday’s trading opened slightly in the green before pulling back for the rest of the day, despite oscillating on panic selling across the blue chip stocks, mid and large cap companies shares, a situation that pushed the NGX’s index to breakdown the psychological line of 49,000 basis points, touching an intraday low of 48,865.47bps from its highs of 49,038.76bps before closing below its opening level at 48,879.74bps.
Market technicals were negative and mixed, with lower volume of shares traded than the previous day in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 8% buy position and 92% sell volume. The total transaction volume index stood at 0.97points, just as impetus behind the day’s performance was weak as Money Flow Index is looking down at 19.28pts, from the previous day’s 19.49pts, indicating that funds left the market.
For you to successfully invest and trade in this volatile market, 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 below.
Index and Market Caps
The NGX All-Share Index, at the end of Monday’s trading shed 144.42bps, closing at 48,879.743bps, after opening at 49,024,16bps, representing a 0.29% decline, just as market capitalization fell by N80bn, closing at N26.37tr, from the previous day’s N26.45tr, which also represented a 0.30% depreciation in value.
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 buying range has just decreased to 15 as they build a new bullish base and positive chart patterns to be on our watchlist. These stocks have double the potentials to rally, considering their earnings prospects and the oscillating moves in a recovery market and 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.
Meanwhile, Monday’s downturn was driven by selloffs in the shares of International Breweries, UCap, Redstar Express, GTCO, Accesscorp, Fidelity Bank and Transcorp among others, which impacted negatively on Year-To-Date gain, reducing it to 14.43%. Market capitalization gain YTD dropped to N2.64tr, representing a 19.45% rise over the opening level for the year.
Bearish Sector Indices
Sectorial performance indexes were in red, led by the NGX Consumer Goods which shed 3.22%, followed by Insurance, Banking and Energy with 0.58%, 0.15% and 0.03% respectively, while NGX Industrial goods closed flat.
Market breadth remained negative, as losers outpaced gainers in the ratio of 21:9; just as activities in volume and value were up, with players trading 173.62.m shares worth N2.39bn. Volume was driven by trades in GTCO, Zenith Bank, UBA, NGXGroup and Chams.
Multiverse and RT Briscoe were the best-performing stocks, gaining 9.8% and 8.80% respectively, closing at N4.05 and N0.37 per share respectively on market forces. On the flip side, International Breweries and Redstar Express lost 9.1% and 7.8% respectively, closing at N4.50 and N2.12 per share, purely on selloffs.
Market Outlook
We expect a mixed sentiment to continue on bargain hunting as NGX index breakdown 49,000 mark, in the midst of quarter-end window dressing by fund managers. This is just as banking stocks are gaining attention, despite profit taking that makes the sector more attractive for income investors, while portfolio rebalancing continues on bargain hunting in the midst of the worsening sovereign risks.
We note also the flow of funds into the fixed income segment on the rate hike by the CBN, as sector rotation persists. Analysts are also focused on the lookout for August CPI and flow of funds amid oil prices oscillation.
Meanwhile, the home study packs on Comprehensive Stock Market trading course video, Stock Market Analysis Beyond Fundamental & Technical Analysis, 2022 Actionable Trading Plan and Opportunities in Q1, INVEST 2022 Traders & Investors Summit materials and 10 Golden Stocks for 2022, Strategies and How to invest profitably in this Changing Market Dynamics/ Recession, Mastering Earnings Season For Profitable Investing and Trading in any market situation/ cycles, Life Beyond COVID 19 Investment Opportunities In The Stock Market are now available. To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085, 08179547605 now
Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08179547605
