Market Update for October 17

The bearish momentum on the Nigerian Exchange continued Thursday. It was a mixed session amid buying sentiment as selloffs hit highly priced stocks and blue chip companies, dragging the composite NGX All-Share index further lower on a low traded volume to test for supply in the midst of positive market internals. Nonetheless, the market reacted positively to some of the impressive Q3 numbers released so far which gave market players insights as to what they should expect by end of the current financial year.

Meanwhile, more corporate earnings reports are expected in the midst of pullbacks, portfolio rebalancing and sector rotation which have created opportunities for buying into value at a time some sectors and industries performance are being influenced by policies of the government and various industry regulators. There are aso the effects of 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 are the different dynamics of stock markets technically which require effective strategies to navigate and follow trends profitably.

In the current phase of correction or pullbacks 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 ahead of their September quarterly earnings reports. Also, seasonal trends are likely to repeat themselves in this last quarter 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 96,568.52 basis points and 96,684.90bps 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.

Lasaco Assurance and others notified the NGX 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.

The NGX index’s action during the session broke down the T line and 50-EMA before retracing up to close  above the T-line and two moving averages of 50-EMA and 50-SMA, this indicate buyers and sellers fighting for domination 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 resisting decline in the midst of buying sentiment and small transacted volume that signaled wait and see, expecting corporate numbers to give a clear direction. Just as candlestick formation and momentum indicators had reveal a weak market in search of strength. As ADX is looking down at 17.33, while RSI and Money Flow Index were down to read 53.19 and 27.96 points against the previous session 55.77 and 36.65 points respectively. Market players should watch this current trend and trade with caution in the face of funds leaving the market on buying 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 Thursday inched up to continue its oscillation, trading at $74.58 per barrel in the midst of weak china economic data and geopolitical tension over supply shock in the wake of continued conflict in the Middle East. Also, weak 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, Thursday’s trading started slightly in the green before pulling back for the rest of the session and oscillated on positioning and selloffs in highly capitalized stocks. This situation pushed the NGX’s index to an intra-day low of 97,644.48bps from its highs of 98,321.71bps, before closing below its opening level at 98,081.38bps.

Market technicals for the session were positive and mixed with lower volume when 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 65% buy position and 35% sell volume. The total transaction volume index stood at 0.54 points, just as impetus behind the day’s performance was weak as Money Flow Index inched down to read 27.96pts, from the previous day’s 36.65pts, indicating that funds left the market.

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Index and Market Caps

The benchmark NGX All-Share Index, at the end of Thursday shed 210.15bps closing at 98,081.38bps after opening at 98,291.53bps, representing a 0.21% decline. Market capitalization fell by N127.34billion, closing at N59.43tr from the previous day’s N59.56tr, representing a 0.21% value loss.

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The downturn was driven by profit taking and selloffs in the shares of Aradel, GTCO, Oando, Ucap and FCMB among others. This impact negatively on Year-To-Date gain which reduce to 31.20%, while Market capitalization was up to N15.32tr, representing 45.34% above its opening level for the year.

Bullish Sector Indices

Sectoral performance indexes were up, except for NGX Banking that closed marginally lower by 0.57%, while the NGX Insurance led advancers after gaining 1.13%, followed by Energy, Industrial and Consumer goods with 0.92%, 0.08% and 0.01% respectively.

Market breadth turned positive, as gainers outnumbered losers in the ratio of 29:15, while transactions in volume and value were down after investors exchanged 239.31 million shares worth N6.41bn. Volume was driven by trades in StertlingNG, Zenith Bank, UBA, GTCO, Accesscorp and UBA.

Golden Breweries and Deap Capital were the best performing stocks, gaining 10% and 9.85% respectively, closing at N3.74 and N1.45 per share respectively on the back of market forces and sentiments respectively. On the flip side, Aradel Holdings and Regency Insurance lost 10% and 8.82% respectively, closing at N694.80 and N0.62per share, purely on selloffs and profit taking.

Market Outlook

We expect mixed sentiment to continue on positioning and profit taking 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