Market Update for July 31

Midweek’s trading on the Nigerian Exchange was a mix of position taking and selloffs, as the market sustained its losses even at the peak of the half-year earnings reporting season when there was an influx of corporate numbers. Some of them came impressive, while others were mixed and disappointing, reflecting the impact of government’s policies and weakening economy due to the ongoing reforms and mismatch of concoctions from the fiscal and monetary authorities.

Consequently, the benchmark NGX All-Share index closed lower again in the midst of negative market internals and a very high traded volume, thereby extending the previous sessions of losses for the seventh successive session with the month closing in red. Also, the market saw many quoted companies rushing to meet regulatory deadlines for submission of quarterly financials to comply with their post-listing requirements. Meanwhile, market players continued to digest the numbers made available in the midst of weak momentum and low valuation.

Surprising numbers came from banking, insurance, energy and other service providing companies like FBN Holdings, Nahco, C & I Leasing and others, while MTNN and some consumer goods companies continued to post negative numbers in their half year results, reflecting the realities of their operating environment and sectors.

The markdown phase of the market had continued, breaking down another psychological line of 98,000 to signal bottom reversal chart pattern that supports  a continuation of trend or a reversal depending on market forces as trading opens at midweek.

However, the ongoing earnings reporting season is likely to support market fundamentals in the midst of sector rotation, portfolio rebalancing and ongoing primary market activities of the banks that has dominated the market even while consumers and investor confidence is dropping fast. Also, private sector businesses are closing down amid economic challenges and over-regulation. It is important to note that market players should only ignore the market shift at their own risk, since the half-year earnings reports are giving insight where to invest, despite economic situation.

Meanwhile, pullbacks and correction continued in some major sectors of the market, a situation that kept the index’s action below the T-Line, revealing the weak momentum and downtrend. The market continues to trade within the value area, creating entry opportunities for discerning investors and smart traders, even as trading volume pattern and support level signals entry into the buy zone at the peak of the quarterly earnings season and dividend announcement. This downtrend could reverse on the strength of these corporate numbers despite the mixed performance, as many value and growth stocks are undervalued.

The NGX index’s action remains below the T-line, while the two moving averages of 50-EMA and 50-SMA are indicating weakness 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, due to the continued mismatch of these and previous ones. There are also issues with the implementation style in the face of oscillating oil production output even as the Naira continues to depreciate at a time that oil is selling below $80 per barrel at the international market.

Meanwhile, during the session, Cutix, McNichols, Aiico Insurance notified the NGX of their AGM and resolutions from their meetings, while Airtel Africa continues to update the market of its ongoing share buyback programme. Also, Ucap informed the market of insider dealings in its shares. In the midst of all these, it is safe for investors to 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 NGX is weak and on the downtrend with selling sentiment and weak momentum as revealed by the candlestick formation and momentum indicators. The ADX is looking up at 27.51, while RSI and Money Flow Index were down to read 27.12 and 42.77 points against the previous session 27.51 and 52.10 points respectively. Market players should watch this current trend and trade wisely in the face of funds leaving the market slowly, 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 interpreting half year numbers.

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 at midweek rebounded to continue its oscillation, as it trades at $81.48 per barrel in the midst of growing fears of war in the middle east and weak demand from China the largest imported of oil, despite the hope of rate cuts in the largest economic. As increasing geopolitical tension across many economies threaten economic activities in the face of cooling inflation. This trend may likely continue for the rest of 2024, while the up and down movement continues to drive volatility, even as ceases fire discussion is ongoing to resolve the Middle East conflict, even as the raging war between Ukraine and Russia continues to influence global oil supply and demand.

Midweek’s trading opened slightly in the green before pulling back to oscillate for the rest of the session on profit taking in industrial and consumer goods stocks, while buying interest in others. This situation pushed the NGX’s index to an intra-day low of 97,708.8bps from its highs of 97,977.90bps, before closing marginally below its opening level at 97,774.20bps.

Market technicals for the session were weak 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 24% buy position and 76% sell volume. The total transaction volume index stood at 3.15 points, just as impetus behind the day’s performance was relatively weak as Money Flow Index was down to read 42.77pts, from the previous day’s 52.10pts, indicating that funds left the market.

For you to successfully invest and trade in this volatile market in 2024, 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

The composite NGX All-Share Index lost 56.43 basis points, closing at 97,774.22bps after opening at 97,830.65bps, representing a 0.06% drop. Market capitalization fell by N111bn, closing at N55.54tr from the previous day’s N55.55tr, which also represented a 0.06% 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 pullbacks 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 downturn was driven by profit taking and selloffs in Nascon, Ucap, Zenith Bank, FBNH, Africa Prudential, UBA, NB and Cutix among others, which impacted mildly on Year-To-Date growth slide to 30.78%. Market capitalization YTD gain grew to N11.10tr, representing 35.76% above its opening level for the year.

Mixed Sector Indices

The sectoral performance indexes were mixed, as the NGX Consumer and Industrial goods closed lower by 0.78% and 0.04% respectively, while NGX Insurance index led the advancers after gaining 1.48%, followed by Banking and Energy with 0.58% and 0.04% respectively.

Market breadth was negative as losers outnumbered gainers in the ratio of 29:27, while activities in volume and value were up after investors exchanged 1.78bn shares worth N23.06bn. Volume was driven by trades in Fidelity Bank, Zenith Bank, Veritas Kapital Assurance, Oando and UBA.

IMG and Veritas Kapital were the best performing stocks, gaining 10% each, closing at N14.30 and N0.99 per share respectively on the back of impressive earnings and sentiment respectively. On the flip side, Cutix and Berger Paints lost 10% each, closing at N5.13 and N13.60 per share, purely on profit taking and selloffs.

Market Outlook

We expect mixed sentiments and reversal on reactions to the surprising earnings reports and sector rotation amidst low valuation. Portfolios repositioning is however continuing, as investors take 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