Mixed Sentiments Ahead Still, Amid Low Price Attraction, Dividend Investing. Reactions To Q1 Earnings

Market Update for May 7

The bearish trend on the Nigerian Exchange continued on Tuesday as the benchmark NGX All-Share index closed lower on an above-average traded volume and negative market internals, thereby extending the bear run for two successive session in the face of selling sentiment and profit taking among the banking stocks and others that further dragged the market down. The pullbacks has created buy opportunities for discerning investors and bargain hunters, as dividend qualification and payment dates guide players positioning.

We expect the correction and profit taking in the equity space to be short-lived, as market players digest and reposition their portfolios on the strength of Q1 earnings reports and changing market fundamentals. The dividend incomes are expected to provide some level of liquidity to the market as payment and AGM meeting dates announced by various companies fall within this month of May, even as all eyes are on the outcome of TB primary market auction today.

The pullback has however created new entry opportunities for market players, given the oversold state of the market and mixed technical position as revealed by the downtrend chart pattern at the end of Tuesday’s session which signals the onset of a reversal of trend or continuation that needs to be confirm as trading opens this morning. Already, the Q1 numbers are likely to be the game changer and unfolding happenings in the economy to further give insight and guide player’s decisions.

The NGX index’s action still trade below the T-line and 50-Day Moving Average slightly, confirming the weight of highly priced stocks in the market and mixed momentum, as the index slide down on a high traded volume and positive market breadth close to 8-day moving average exponential and 50 DMA to confirm continuation or reversal of trend depending on market forces and liquidity level.

Market players are also looking at corporate actions to position for dividend income. Although, we see fiscal and monetary policies trying to return the nation’s economy to the path of recovery, even with the continued mismatch of policies and implementation style. As oscillating oil production output.

More companies on the exchange continued to notify the investing public of their AGM and board meetings. The latest came from Abbey Mortgage Bank, Union Dicon and others, while Airtel Africa continued to update the market on its share buyback and Accesscorp informed the market of its insiders dealing. Therefore, investors 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, there is a reversal on the NGX, as the market pulled back on a selling sentiment as revealed by candlesticks formation and momentum indicators. As ADX is looking down at 35.96, while RSI and Money Flow Index are down to read 36.02 and 41.53 points against the previous session 38.45 and 41.61 points respectively.  Market players should watch this current trend and trade with caution after the index had signaled reversal in the face of funds entering the market slowing down. Also, trading volume pattern remained mixed, to suggests wait and see in some sectors and buying interest in the face of a distributing market.

To navigate the rest of the 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 price pulled back on Tuesday, as it continues its oscillation to trade at $82.86 per barrel in the midst of rising US inventories and cautious supply expectations. As tension in Middle East and mixed macroeconomic data from matured economies persists.   Geopolitical tension across the globe remained a major threat to many economies and the commodity market and other factors that impact oil price as it continued to rally. This trend may likely continue in 2024, this up and down movement that drive volatility. As middle East conflict and war in Ukraine last.

Tuesday’s trading started slightly in the upside before pulling back to oscillate for the rest of the session on selloffs and profit taking in financial service stocks and others. This situation pushed the NGX’s index to an intraday low of 98,201.94bps from its highs of 98,819.95bps, before closing below its opening figure at 98,228.50bps.

Market technicals for the session were mixed and weak, as volume was lower when compared to the previous session in the midst of breadth favoring the bulls on a selling sentiment as revealed by Investdata’s Sentiments Report showing 4% buy position and 96% sell volume. The total transaction volume index stood at 0.93 points, just as energy behind the day’s performance was  relatively weak as Money Flow Index slide to read  41.53pts, from the previous day’s 41.61pts, indicating that funds left the market.

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Index and Market Caps

The composite NGX All-Share Index, at the close of trading on Tuesday lost 475.18bps to 98,228.50bps after opening at 98,703.68bps, representing a 0.48% decline, just as market capitalization fell by N268.75bn, closing at N55.55tr from the previous day’s N55.82tr, which also represented a 0.48% 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 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 booking and selloffs in the shares of MTNN, FBNH, Dangote Sugar, GTCO, Zenith Bank, NB and Mansard among others. This impacted negatively on Year-To-Date gain which increased to 31.37%. Market capitalization YTD gain stood at N11.49tr, representing 36.72% above its opening level for the year.

Bearish Sector Indices

The sectoral performance indexes were down, as NGX Oil/Gas and Industrial goods closed flat, while the NGX Banking index led the decliners after losing 3.11%, followed by Insurance and Consumer goods with 1.48% and 0.66% respectively.

Market breadth turned negative as losers outnumbered gainers in the ratio of 27:14, while activities in volume and value were mixed after investors exchanged 425.66m shares worth N8.35bn. Volume was driven by trades in UBA, Accesscorp, Transcorp, Japaul Gold and Aiico.

Japaul Gold and Presco were the best performing stocks, gaining 10% each, closing at N2.09 and N291.50 per share respectively on market forces and impressive earnings. On the flip side, Unity Bank and FBNH lost 10% and 9.91% respectively, closing at N1.62 and N25.45per share, purely on selloffs and profit taking.

Market Outlook

We expect mixed sentiments to continue in the face of low price attraction, dividend investing and reaction to Q1 numbers as Insurance corporate earnings are expected with dividend announcements, while taking advantage of pullbacks to position and rebalancing portfolio.

This is amid the volatility and pullbacks that 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