Mixed Sentiments May Continue On Profit Taking, As Investors Digest Earnings, Ahead of MPC Meeting

Market Update for January   23

Mixed sentiments continued on the Nigerian Exchange on Tuesday in the face of persistent bull run and profit booking as market players bet on highly priced stocks and others that pushed the benchmark NGX All-Share index above 98,000 psychological line, heading to another milestone of 100,000 mark. Bargain hunters continued to accumulate the shares of Dangote Cement, Seplat Energies, BUA Cement, and BUA Foods, among, extending the bull transition for the nine consecutive sessions in the oscillating volume pattern and volatility.

Profit taking hit some sectors and individual stocks in the midst of expectation of more corporate earnings, this will trigger sector rotation and provide buying opportunities for discerning investors and smart traders watching out for the value area of resistances and supports level ahead of these companies’ results hitting the market any moment from now. The NGX has displayed a mixed picture as market players eagerly awaits numbers from the companies, following the optimism that was fueled by the belief that financial sector impressive performance and growth prospect of the economy in the face of rising macroeconomic headwinds will support further rally and revaluation of assets in 2024. But the recent rally in the past few sessions had been driven by large cap companies, as traders cash out profit from the low, medium and blue chip stocks to create new entrance for dividend income players.

However, market players look forward to the outcome of today TB primary market auction rates as the market expect  monetary policy meeting to hike MPR in their  upcoming meeting February ending,  after six months of the benchmark rate remaining unchanged at 18.75% since July 2023. The expected adjustment in rates could be one of the factors that set the market in this situation, just as the equity market remained a better option, as fixed income rates and yields continue oscillating, while the NGX year-to-date returns stood at a robust 31.89% in less than 20 trading sessions. This is to be expected, given that more funds flowed into stocks with impressive earnings that would expectedly support higher dividend payouts.

Also, all eyes are still on the fiscal and monetary authorities for a clear direction of where the economy is heading, given developments in the global economy, especially the sustained geopolitical tensions in the Middle East and Eastern Europe. There is also the fear of a recession, among other issues that will continue to influence investment decisions, while driving volatility.

The NGX index’s action remains above the T-line, as it makes another new historic milestone of breaking out strong resistance level of 96,307.46point to cross the 98,000 psychological line in the midst of high volatility and positive momentum to trade above the short and long term Moving Averages on the daily, weekly and monthly time frame. Portfolio rebalancing on the exchange continued in the face of earnings season and volatility, as more companies like Geregu Power, Japaul Gold and others notified the NGX and investors of their board meetings and closed period for the 2023 full-year financials. Just as Cutix informed the market of insiders dealing.

The candlestick formation at the end of Monday trading revealed mixed sentiment and profit taking which may likely continue, despite the uptrend, as trading opens this morning. Therefore, market players 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, the index’s action has remained on overbought, which is also a topping chart pattern that signal reversal of trend.

The strength behind the trend or the session remained strong as revealed by momentum indicators, despite the overbought state of the market, as the ADX read 78.83, while RSI and Money Flow Index are looking flat to 95.04 and 88.93 points against the previous session 94.18 and 88.92 points respectively. This should be a concern for investors and smart traders as they trade with caution. The trading volume pattern suggests hold and watch disposition of market players, as profit taking continue while investors accumulate more positions in some stocks as others investment windows returns remain below inflation and negative.  Also, the anticipated financial market and economic reset in 2024, comes with huge opportunities to create wealth for smart investors and traders.

To navigate the rest of the quarter 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 inched up on Tuesday, amidst continued oscillation, to trade at $79.40 per barrel in the midst traders assessing the effects of ongoing conflicts in the Middle East and Ukraine, as global economic outlook remained mixed with the weak China GDP and others. The rising geopolitical tension across the globe is also a major threat to many economies. Also, oil supply increase by OPEC and others impact oil price as it continued trade below $80. This trend may likely continue in 2024, this up and down movement of oil price also continues to drive volatility.

Tuesday’s trading started on the upside and was sustained for the rest the session, despite oscillating on buying interests in industrial goods, petroleum marketing companies and profit taking in others. This pushed the NGX’s index to an intraday high of 98,947.31 basis points from its lows of 95,732.95bps, before it closed significantly above its opening level at 98,616.97 bps.

Market technicals were positive and mixed, as volume of trade was higher 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 90% buy position and 10% sell volume. The total transaction volume index stood at 1.03points, just as energy behind the day’s performance was strong as Money Flow Index looking flat at 88.93pts, from the previous day’s 88.92pts, indicating that funds entered the market.

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Index and Market Caps

At the end of Tuesday’s trading, the composite NGX All-Share Index  gained 2,848.85bps, closing at 98,616.97bps after opening at 95,768.12bps, representing a 2.97% growth, just as market capitalization rose by N1.56 trillion, closing at N53.97tr from the previous day’s N52.41tr, which also represented a 2.97%  value gain.

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 overbought range has just increased to 54 as they rallied to new highs that 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.

Meanwhile, the upturn was driven by accumulation in the shares of Dangote Cement, Seplat, BUA Cement, BUA Foods, Eterna, MTNN and UPDC, among others, which impacted positively on Year-To-Date gain of 31.89%. Market capitalization YTD gain stood at N10.23 trillion, representing 31.89% above its opening level for the year.

Mixed Sector Indices

Sectoral performance indexes for the session were mixed, as the NGX Insurance  and Banking  indexes closed lower by  4.68% and 2.66% respectively, while NGX Industrial goods  index led the advancers after gaining 8.96%  followed by  Energy and Consumer  with  5.56% and 1.88% respectively.

Market breadth turned negative as losers outnumbered gainers in the ratio of 47:24, whereas activities in volume and value were down, after players exchanged 721.81m shares worth N14.41bn. Volume was driven by trades in Transcorp, SterlingNG, UBA, Accesscorp and Zenith Bank.

Seplat and BUA Cement were the best performing stocks, gaining 10% each, closing at N2,795.10 and N163.35per share respectively on market forces and sentiments.  On the flip side, Veritas Kapial   and Mutual Benefits Assurance lost 10% each, closing at N0.63 and N0.72per share, purely on profit taking.

Market Outlook

We expect mixed sentiments to continue on profit taking and reactions to earnings reports, as  market players digest these numbers  in the face of  volatility and coming MPC meeting, while pullback at this point will 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




Tel: 08028164085, 08179547605

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