Mixed Sentiments Positioning May Continue Amid Profit Taking On Impressive Earnings, NTB Primary Auction

Market Update for February 7

Profit taking resurfaced on the Nigerian Exchange Tuesday amidst mixed sentiments, as the benchmark NGX All-Share index pulled back slightly on a less than average traded volume and negative market breadth, which halted the sixth successive session of bull transition, trading above its last resistance level that turn support at the close of Tuesday trading.
Portfolio rebalancing and profit booking continued in the face of market players reacting to better than expected unaudited earnings that had given insight what investors and traders should expect from these companies in their full year audited accounts and corporate action on or before March 31, 2023. All eyes are on the companies that did not release unaudited results which its audited financials and corporate actions are expected to start hitting the market any moment from next week, ahead of the January Consumer Price Index report and the general elections.
The market maintained its strong momentum on Tuesday, despite the profit taking and selloffs in some stocks that had rallied recent to form a top pattern reversal chart that needs confirmation at the opening of midweek’s trading. On the strength of the expected early filers and others, this uptrend should be sustaining in the near term and correct during post earnings season before the governorship election or after due to price adjustment for dividend declared. And, also, the outcome of the elections.
There was mixed sentiment across the major sectors of the market, except for energy that witnessed buying interests on impressive numbers from the sector, which may continue to support the rally as revealed in the short and medium-term trends which remain intact. Midweek’s trading will give a clear direction as more companies release their scorecards, just as it may signal the continuation of this recovery in the month of February, notwithstanding uncertainties associated with the coming 2023 general elections.
Technically, the NGX index’s action had entered its distribution phase which signal pullback after the market had formed bullish V-shape pattern that indicates reversal or continuation of trend on a daily and weekly time frame. Just as there is a divergence between the index action and MACD on a dally chart that supports downtrend, due to profit taking in blue chip stocks. Let us keep our gaze on market forces and money flow.
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Oil price oscillation continued, as it sustained it recent rebound to trade at $83.98 per barrel, on weak dollar and rising demand of Chinese as their economic recovery in the midst of rising attacked on Ukraine. Just as the geopolitical tension, high interest rate and inflation across the globe continue to threaten the world. Also, supply tightened due to the Russia-Ukraine war that has lingered so far. The up and down movement of oil price also continues to drive volatility across markets.
Meanwhile, Tuesday’s trading opened slightly in the upside but pulled back at midday on profit taking which was sustained for the rest of the session, a situation that pushed the NGX’s index to an intraday low of 54,236.37 basis points from its highs of 54,369.44bps, before closing slightly below its opening figure at 54,299.76bps.
Market technicals were negative and mixed, with higher volume of trade, compared to the previous session in the midst of breadth favoring bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 48% buy position and 52% sell volume. The total transaction volume index stood at 0.60 points, just as momentum behind the day’s performance was strong as Money Flow Index looked down at 77.66pts, from the previous day’s 81.38pts, indicating that funds left the market.
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Index and Market Caps
At the end of Tuesday trading, NGX All Share Index slide by 69.86basis points, closing at 54,229.76bps, after opening at 54,367.74bps, representing a 0.13% growth, just as market capitalization fell by N37.03bn closing at N29.58tr from the previous day’s N29.61tr, which also represented a 0.12% value loss.
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Tuesday’s downturn was driven by selloffs in the shares of Geregu Power, UACN, FCMB, Ardova, Sterling Bnak, Linkage Assurance, Unity Bank and Japaul Gold among others, which impacted mildly on Year-To-Date gain to reduce 5.95%. Market capitalization YTD gain stood at N1.76tr, representing 5.95% above its opening level for the year.

Bearish Sector Indices
Sectorial performance indexes for the session were down, save for NGX Energy that closed higher by 0.54%, while NGX Insurance led the decliners after losing 0.80%. followed by Banking, Industrial and Consumer goods with 0.61%, 0.31% and 0.02% respectively.
Market breadth turned negative as losers outnumbered gainers in the ratio of 26:20, while activities in volume and value were up, after investors exchanged 200.04m shares worth N7.62bn. Volume was driven by trades in FCMB, Geregu, Sterling Bank. Transcorp and Zenith Bank.
Conoil and MRS were the best performing stocks, after gaining 10% and 9.82% respectively, closing at N29.15 and N21.25per share respectively on market forces and impressive earnings. On the flip side, Japaul Gold and FCMB lost 9.37% and 7.82% respectively, closing at N0.29 and N4.60per share, purely on profit taking.

Market Outlook
We expect mixed sentiments and trend to continue on positioning and profit taking as portfolio rebalancing in the midst of impressive corporate earnings and expected NTB primary market, amidst the release of more audited earnings and anxiety over the election uncertainty. Any pullback at this point may 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.

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