Market Update for August 19
Monday’s session on the Nigerian Exchange was a mixed as trading started the week on a negative note, due to selloffs in highly capitalized stocks that weighed on the composite NGX All-Share index which closed lower. Traded volume was low and market breadth positive market that revealed a selling sentiment after pulling back to breakdown the strong support level of 96,843.10 and psychological line of 96,000 to provide opportunities for discerning investors and traders buy into value.
The market fundamentals and trends continued to change on a mixed macroeconomic data and corporate earnings that beat expectations, especially from the services industries, despite some sectors positing mixed and disappointing numbers that had triggered the ongoing sector rotation and portfolio realignment on the exchange. Also, the current pullbacks or correction have increased opportunities available on the NGX with the oversold state of the market and some stocks.
However, players must correctly trade volatility to get the gains it offers, while protecting their portfolios from being on the wrong side of the market, or any surprise big down day. This is why your understanding of volatile trend days and reversal days with technical tools will help you benefit from market volatility or oscillation at any time and any day.
Weak momentum and sentiment persisted as reflected in the market dynamics of volatility that creates the needed opportunity to buy low and sell high, especially as most of the listed companies have become undervalue, even as the pullbacks are driven by high cap stocks that are facing selloffs due to sector rotations and portfolio rebalancing. This pullback below the 96,000 psychological line, T-line and 50-Day Moving Averages confirms weakness of momentum and the distribution phase of the market.
Profit taking across some major sectors of the market also weighed in on the NGX, creating opportunities for market players to pick value stocks at discounted prices. This is especially now that corporate numbers reveal the position of many companies on the exchange, despite the ongoing economic headwinds as revealed by economic data. The selling sentiment and pullback are a different phase of market that requires change in strategies to navigate and follow the trend. It is expected that smart money will take advantage of the oversold state in the market to buy into value and defensive stocks to support rebound any moment from now.
The market continues to trade within the value area, creating entry opportunities for discerning investors and smart traders, even as transaction volume patterns and support levels signal the ‘buy zone’ ahead of July consumer price index and banks interim dividend announcement. This pullback may not last on the strength of earnings power of many undervalue and growth stocks.
The NGX index’s action remains below the T-line and the two moving averages of 50-EMA and 50-SMA indicate 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 amid the oscillating oil production output even as the Naira continues to depreciate at a time that oil is rebounding to sell below $80 per barrel at the international market.
Meanwhile, more companies notified the exchange of their Annual General Meetings. The latest came from PZ Cussons and Secure Electronic Tech, while Airtel Africa continues to update the Exchange of its ongoing share buyback programme, as second tranche of $50m commenced. Also, MTNN made available its rating position and renegotiation of lease agreement that is likely to impact its bottom line, while, E-Tranzact informed the exchange 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 on a pullback with selling sentiments as revealed by the candlestick formation and momentum indicators. The ADX is looking up at 27.66, while RSI and Money Flow Index were mixed to read 28.22 and 26.11 points against the previous session 36.33 and 26.11 points respectively. Market players should watch this current trend and trade with caution in the face of funds leaving the market, 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 digesting economic data.
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Oil prices on Monday slide to continue its oscillation as it trades at $77.12 per barrel in the midst of global demand fear and ceasefire talk in the Middle East conflict entered another stage. As rising geopolitical uncertainties across many economies is a threat to the global economy. 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, Monday’s trading opened in the upside till afternoon, before pulling back to oscillate for the rest of session on selloffs in highly priced stocks and buying interest in blue chip companies, a situation that pushed the NGX’s index to an intra-day low of 95,634.97bps from its highs of 97,505.39bps, before closing sharply below its opening level at 95,781.68bps.
Market technicals for the session were negative and mixed with higher volume 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 8% buy position and 92% sell volume. The total transaction volume index stood at 0.77 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index was flat to read 26.11pts, from the previous day’s 26.11pts, indicating that funds entered the market, despite closing in the red.
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Index and Market Caps
At the end of Monday’s trading, benchmark NGX All-Share Index shed 1,318.63 basis points, closing at 95,781.68bps after opening at 97,100.31bps, representing a 1.36% decline. Market capitalization fell by N749.73bn, closing at N54.38tr from the previous day’s N55.13tr, which also represented a 1.36% depreciation in value.
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The downturn was driven by profit taking and selloffs in Dangote Cement, Dangote Sugar, NB, Beta Glass, NEM, Aiico and Africa Prudential among others. This impacted negatively on Year-To-Date growth reduced to 28.09%. Market capitalization YTD gain fell to N9.87tr, representing 32.54% above its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed, as the NGX Banking and Energy NGX Indexes closed 0.17% and 0.11% higher respectively, while the NGX Industrial Goods led the decliners after losing 4.96%, followed by Insurance and Consumer goods with 0.71% and 0.67% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 31:18, while activities in volume and value were up after investors exchanged 3.55b shares worth N7.65bn. Volume was driven by trades in GTCO, Wema Bank, Accesscorp, UBA and Fidelity Bank.
Cutix and RT Briscoe were the best performing stocks, gaining 10% each, closing at N2.64 and N1.87 per share respectively on the back of market forces and sentiment respectively. On the flip side, Dangote Cement and NSL TECH lost 10% and 9.76% respectively, closing at N532.00 and N0.37 per share, purely on selloffs.
Market Outlook
We expect mixed sentiment and bargain hunting to continue on profit taking and sector rotation amidst oversold region. 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
