Mixed Sentiments, As Profit Taking Fresh Entry Opportunities Ahead Of Earnings Season

Market Update for July 4

The bears resurfaced on the Nigerian Exchange Thursday in the midst of buying sentiment and low traded volume, even as demand for financial services stocks increased on the exchange ahead of expected financials and macroeconomic reports in the month July. Consequently, the composite NGX All-Share index closed lower on a marginal negative market breadth, remaining above the T-line, after breaking it to retrace up and thereby halting the two consecutive sessions of bull transition. Meanwhile, position taking and sector rotation persisted ahead of the earnings reporting season that comes with changes in liquidity, momentum, volume and reactions to positive earnings and disappointing numbers to drive volatility that create wealth for market players.

The market has formed a top pattern even while trying to resist decline as revealed by the candlestick at the end on Thursday trading.  Breaking out this strong resistance level of 100,388.80 will confirm a new uptrend that is a function of the state of corporate earnings and macroeconomic indices as all eyes are on these numbers that will drive flow of funds in the financial market. As such, confirmation is needed to give a direction next week as more companies are set to release their half-year scorecards in this month. The oscillating volume pattern is an indication that smart money is not in the market now.

The changing market structure and fundamentals persist, as distribution phase resurfaced to signal pullback or continuation of trend is underway even as all eyes are on the early filers to give indication and insight. Specifically, market players look to numbers from Infinity Trust Mortgage Bank, United Capital, Africa Prudential and others. The rest of the year will most likely be dominated by primary market activities of banks and other companies raising funds to recapitalized their operations and businesses.

The NGX index’s action remains above the T-line and the two moving averages of 50-EMA and 50-SMA in the midst of changing market fundamentals and technical to indicate slowing momentum. Also, market players are looking forward to economic data and corporate earnings to reveal the state of economy and companies.  As economic reforms of the government through the fiscal and monetary policies are yet to put the nation’s economy on the path of recovery, due to continued mismatch of policies and implementation style in the face of oscillating oil production output and exchange market challenges. Despite oil price selling above $86 in the international market.

With the half-year earnings reporting season drawing closer, more companies like  Okomu Oil, VFD Group and The Initiates Plc, among others have informed the market of their closed period and board meetings to approve the second quarter earnings report. This is as more Annual General Meetings notifications hit the platform. Just as some other companies presented resolutions from their meetings, with the latest coming from The Initiates Plc, while Airtel Africa updated the market of its ongoing share buyback. Neimenth Pharm and The Initiates Plc also informed the market of insider dealing 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 market has signaled a top pattern reversal as revealed by candlestick formation and mixed momentum indicators. As ADX inched up at 21.13, while RSI and Money Flow Index were mixed to read 63.00 and 62.22 points against the previous session 60.19 and 64.75points respectively. Market players should watch this current trend and trade wisely as reversal is underway in the face of funds slowing down in the market on positioning and profit taking. Also, trading volume pattern continued to oscillates, suggesting selloffs and buying interest in some sectors in the midst of wait and see attitude ahead of Q2 corporate 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 jumped higher on Thursday to continue its oscillation as it trades at $87.55 per barrel  heading for another week gain in the midst of  strong summer demand and decline in US inventories ahead job reports that will impact US rate cuts or not. As fear sticky inflation continued. As mixed economic data from China and others remain also a concern for market players across the globe. Just as increasing geopolitical tension threats many economies even with the expect impact of rate cuts on the economic activities in the face of sticky inflation. This trend may likely continue in 2024, this up and down movement that drive volatility. As Middle East conflict and war in Ukraine continue to influence oil supply and demand.

Meanwhile, Thursday’s trading opened in the green but pulled back to oscillate for  the rest of the session on selloffs in MTNN and buying interest in others stocks across some major sectors, a situation that pushed the NGX’s index to an intra-day low of 99,864.15bps from its highs of 100,388.80bps, before closing below its opening level at 100,065.70bps.

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 buying sentiment as revealed by Investdata’s Sentiments Report showing 96% buy position and 4% sell volume. The total transaction volume index stood at 0.66 points, just as energy behind the day’s performance was relatively strong as Money Flow Index  slide to read 65.01pts, from the previous day’s 62.22pts, indicating that funds entered  the market, despite closing  lower.

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 NGX All-Share Index on Thursday shed 236.16 basis points to close at 100,063.32bps after opening at 100,299.48bps, representing a 0.24% decline. Market capitalization fell by N133.46bn, closing at N56.60tr from the previous day’s N56.74tr, which also represented a 0.24% 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.

Thursday’s downturn was driven by profit taking in the shares of MTNN, Champion, UPDC, UPL and Wapco among others.  The day’s gains impacted negatively on Year-To-Date growth which rose to 33.8%, while Market capitalization YTD gain stood at N11.56tr, representing 38.23% above its opening level for the year.


Mixed Sector Indices

Sectoral performance indexes were mixed, as NGX Industrial and Consumer goods index closed lower by 0.06% and 0.01% respectively, while NGX Banking index led the advancers after gaining  2.12%, followed by Energy and Insurance  with 1.43% and 0.15% respectively.

Market breadth slightly negative as losers outnumbered gainers in the ratio of 25:24, while activities in volume and value were up after players exchanged 863.58m  shares worth N12.56bn. Volume was driven by trades in Fidelity Bank,  GTCO, Veritas Kapital, UBA and Zenith Bank.

Oando and  Conoil were the best performing stocks, gaining 9.93% and 9.52% respectively, closing at N2.29 and N0.70 per share respectively on dividend news of N3.50 and sentiment. On the flip side, Daarcomm and Guinea Insurance  lost 8.33% and 7.69% respectively, closing at N0.64 and N4.10 per share, purely on profit taking.


Market Outlook

We expect mixed sentiments and profit taking that will create new entry opportunities for discerning market players ahead of earnings reporting season kicking off any moment next week, as portfolios repositioning continue, while taking advantage of pullbacks to buy into value.

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