Market Update for October 14
Trading on the Nigerian Exchange started the week on a positive note, as the market sustained an uptrend in the face of buying sentiments and a bullish outlook across board and ahead of more September quarterly earnings reports. Already, numbers from companies in the utility sector have come impressive and outstanding, beating expectations, despite the high prices Geregu Power and Transpower shares are trading. These results have given an insight into what market players should expect from sectors or industry where there are increase in prices of their goods and services, premium, tariff and others which would impact their earnings performance.
The benchmark NGX All-Share index closed Monday higher on a low traded volume and negative market internals to form a triple top chart pattern at a resistance level of 98,223.04 basis points, with support level at 97,398.07bps. if the market stays above this support level we could see further upsides, especially if earnings from other sectors equally beat market expectation to breakout the resistance level of 98,223.04bps.
However, if the NGX index breaks below 97,398.07bps, it may signal a deeper correction, potentially pushing index down toward 96,684.90. The strength or weakness of any market are the different dynamics of stock markets technically that require effective strategies to navigate and follow trends profitably. As the newly listed Aradel Holdings and other stocks supported the market close sharply in green.
The markup phase in the midst of breadth contraction provides entry opportunities into value stocks by discerning investors and smart traders as repositioning of portfolios along sectors and companies with potentials to release positive numbers on the strength of their earnings power continue ahead of more Q3 numbers. Also, more early filers are expected to release their results this week, with focus on September consumer price index reports today Tuesday from the National Bureau of Statistics. These numbers are likely to guide investing public decision ahead of CBN policy meeting in November.
Historically, and in technical analysis, trends or patterns repeat themselves. This last quarter of the year 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 96,684.90 basis points and 96,702.26bps after forming a bottoming tail and uptrend candles. This created the perfect setup for high probability swing trade to catch on ahead of earnings news that will impact prices.
Cadbury and others continued to notify 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.
As the NGX index’s action breaks out the T-line to trade above the two 50-EMA and 50-SMA, this indicates strong momentum 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, despite the seeming slowdown inflation and mixed macroeconomic data. 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 on an uptrend in the midst of buying sentiment, expecting corporate and economic numbers to give a clear direction. As these reports hits the market any moment from now. Candlestick formation and momentum indicators had revealed strength returning to the market. As ADX inched down at 19.33, while RSI and Money Flow Index were mixed to read 56.77 and 40.86 points against the previous session 48.78 and 46.62 points respectively. Market players should watch this current trend and trade with caution in the face of funds entering 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 Monday dropped to continue its oscillation, as it trade at $74.55 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, Monday’s trading opened in the upside and it was sustained throughout the session on buying interest in blue companies and the admission of Aradel on the NGX. This situation pushed the NGX’s index to an intra-day high of 98,223.04basis points from its lows of 97,568.52bps, before closing above its opening level at 98,215.13bps.
Market technicals for the session were negative and mixed with higher volume when compared to the previous session in the midst of breadth that favour the bears on a buying sentiment as revealed by Investdata’s Sentiments Report showing 99% buy position and 1% sell volume. The total transaction volume index stood at 0.55 points, just as impetus behind the day’s performance was relatively strong as Money Flow Index was fell to read 40.86pts, from the previous day’s 40.58pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Monday, the composite NGX All-Share Index gained 608.50basis points closing at 98,215.13bps after opening at 97,606.63bps, representing a 0.62% growth. Market capitalization rose by N3.42tr, closing at N59.54tr from the previous day’s N56.08tr, representing a 6.09% appreciation in value, as a result of 4.32bn shares of Aradel Holdings listed at N702.69 each.
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The upturn was driven by position taking and accumulation in the shares of Dangote Sugar, Oando, GTCO, FBNH, Aradel Holdings, Nascon and Aiico among others. This expectedly had positive impact on Year-To-Date gain which increased sharply to 31.35%, while Market capitalization was up to N15.12tr, representing 41.96% above its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed, as the NGX Energy and Industrial Goods closed lower by 0.02% and 0.01% respectively, while the NGX Banking led advancers after gaining 0.36%, followed by Insurance and Consumer goods with 0.29% and 0.24% respectively.
Market breadth was negative as losers outnumbered gainers in the ratio of 31:20, while transactions in volume and value were up after investors exchanged 304.97 million shares worth N19.71bn. Volume was driven by trades in Cutix, Zenith Bank,UBA, Chams and Aradel Holdings.
Coronation Insurance and Conhall Plc were the best performing stocks, gaining 10% and 9.35% respectively, closing at N0.88 and N1.52 per share respectively on the back of market forces and expectations respectively. On the flip side, Vitafoam and Tantalizer lost 9.09% and 8.33% respectively, closing at N20.00 and N0.55per share, purely on 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
