Mixed Sentiments, Profit Taking  May Linger On Bargain Hunting, As Investors React To Earnings Inflow

Market Update for January   29

Trading activities on the Nigerian Exchange was mixed on Monday, kicking off the week of unaudited earnings submission deadline on a positive note on the strength of increased buying interests in cement manufacturing companies, among other stocks. The strategic positioning of high net worth investors in Dangote Cement supported the composite NGX All-Share index which closed higher in the midst more corporate scorecards inflow and profit taking ahead of statutory deadline.

The market is entering the peak of the earnings reporting season where sentiments and earnings fundamentals drive momentum and liquidity level as players react to the numbers being provided. These results are expectedly impressive or disappointing, depending on where the pendulum swings. This will drive oscillation and volatility as dividend announcement and corporate action kick off in February with early fliers.

Over the weekend and during Monday’s session, there were inflows of unaudited corporate earnings. Some like Berger Paints, FCMB, NNFM, Okomu Oil. Wema Bank, Nahco and others came impressive, while those of Total Energies, Ikeja Hotel, Livestock Feeds, Redstar Express, Flour Mill, Honeywell Flour, and others came below market expectation as some of these numbers were mixed and others negative earnings for the period ended December 31, 2023. The market is expected to react to these numbers as trading opens this morning. We saw positive market reactions to impressive earnings from Japual Gold, Berger Paints, Nahco and others during Monday session.

Again, the NGX’s index made a higher high, crossing the 104,000 psychological line to another new all-time high of 104,674.72bps after testing 105,005.84 points on low traded volume and negative market breadth which reflected mixed sentiments of buying and profit taking among market players to sustain the uptrend in the midst of volatility and the ongoing earnings reporting season. Already, the market is looking forward to big names, and particularly more banks and blue-chip, just as the numbers released so far have given more insights into market valuation and fundamental analysis as prices are correcting already ahead dividend declaration.

Profit taking continued in some of the major sectors and individual stocks in the midst of expectation of more corporate earnings, as sector rotation persists in the face of pullbacks. This has provided buying opportunities for discerning investors and smart traders watching out for the value areas 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 await 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 rebound 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.

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, on daily basis 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,  Just as Jaiz Bank notified the market of its board meeting and closed period, while Africa Prudential inform the exchange of change in its leadership, as new Managing Director was appointed.

Monday’s candlestick formation and chart pattern revealed buying sentiment that may likely continue or reverse, depending on market forces and sentiments 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 state with bearish money flow divergent which is also a topping chart pattern that signal reversal of trend underway.

On 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 83.73, while RSI and Money Flow Index are looking flat to 96.38 and 87.57 points against the previous session 95.91 and 88.06 points respectively. This should be a concern for investors and smart traders as they trade with caution because funds are leaving the market as a result of profit taking. 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 pulled back on Monday, to continue it oscillation as trades at $82.24 per barrel in the midst of concerns over struggling property sector in China and weak global demand outlook, as conflicts in the Middle East and Ukraine persists, in the face of global economic outlook remaining mixed. 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 to oscillate. This trend may likely continue in 2024, this up and down movement of oil price also continues to drive volatility.

Meanwhile, Monday’s trading opened in the upside before pulling back and rebounded, which was sustained for the rest of the session, despite oscillating on buying interests in industrial goods stocks, blue chip companies and profit taking in others. This pushed the NGX’s index to an intraday high of 105,005.84 basis points, from its lows of 100,682.60bps, before closing sharply above its opening level at 104,672.72 bps.

Market technicals were positive and mixed, as transaction volume was higher compared to the previous session in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 92% buy position and 8% sell volume. The total transaction volume index stood at 0.93points, just as impetus behind the day’s performance was strong as Money Flow Index looking flat at 87.57pts, from the previous day’s 88.06pts, indicating that funds left the market, despite closing higher.

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Index and Market Caps

The key performance index NGXASI, at the end of Monday trading  gained 2,272.79bps to close at 104,674.67 after opening at 102,401.88bps, representing a 2.22% growth, just as market capitalization rose by N1.24 trillion, closing at N57.28tr from the previous day’s N56.04tr, which also represented a 2.22%  appreciation in value.

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The day’s upturn was driven by accumulation in the shares of  Dangote Cement, BUA Cement, Berger Paints, Oando, Nahco, Cap, Wema Bank, SterlingNG  and Japaul Gold, among others, which impacted positively on Year-To-Date gain of 39.99%. Market capitalization YTD gain stood at N13.46tr, representing 40% above its opening level for the year.

Bearish Sector Indices

The sectoral performance indexes for the session were in red, save for the NGX Industrial goods indexes that closed higher by 6.65%, while NGX Banking index led the decliners after losing 1.05% followed by Insurance, Consumer goods and Energy with 0.92%, 0.25% and 0.12% respectively.

Market breadth turned negative as losers outnumbered gainers in the ratio of 38:22, whereas activities in volume and value were up, after players exchanged 689.93m shares worth N25.94bn. Volume was driven by trades in Japaul Gold, Transcorp, Zenith Bank, Accesscorp and GTCO.

Oando and Dangote Cement were the best performing stocks, gaining 9.96% and 9.93% respectively, closing at N13.80 and N763.00per share respectively on market forces and sentiments.  On the flip side,  Daarcomm and Ikeja Hotel  lost  10% each, closing at N0.81 and N6.75per share, purely on profit taking and selloffs.

Market Outlook

We expect mixed sentiments and profit taking  to continue on bargain hunting 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