Mixed Sentiments Still, Amid Low Valuation, As Investors Position On Pullbacks

Market Update for June 6

The Nigerian equity market continued its seesaw movement on Thursday, with the composite NGX All-Share index closing lower and halting the previous gain on a low traded volume and negative market internals in the midst of selling sentiment in some major sectors of the market.

Profit taking in banking stocks weighed on the index negatively, even as all eyes are still on the inflow of more March year-end audited scorecards, especially from the publishing companies. Total Energies, MRS Oil and FCMB, however,  released their Q3 earnings forecast in order to guide investors and their investment decisions regarding where the various companies are headed.

Investors and traders are also positioning and taking safe bets on the back of expected macroeconomic data such as the Consumer Price Index for the month of May, just as preparations by banks in the country for primary market activities reaches top gear as the seek to raise funds for the new regulatory minimum capital bases stipulated by the Central Bank of Nigeria (CBN).

The ongoing sector rotation and portfolio rebalancing will continue ahead of half year earnings reporting season next month. The service oriented companies had started to drive the nation economy again, as revealed by Q1 GDP, sectors like financial, insurance, aviation, agriculture, oil and tech companies, among others. This is expected to support their numbers going into the future.

The current market oscillation and volatility creates buy opportunities for discerning investors and smart traders, because the positive and negative sentiment are driven by reactions to macroeconomic data, corporate earnings, news, government policies, regulations, and rules, among others. Every trader who trades for one market condition, knows that the indicator goes up and down, and works until it finally breaks. It always breaks and markets do not always go down-even if you sustain losses on a downtrend. Inevitably, this will breakout or reverse. So, the big secret, for successful investors and traders is timing in any market situation and invest or trade where there is opportunity.

Investing with corporate actions that comes with qualification and payment dates help investors and traders to time their positioning. Market players are still repositioning their portfolios on the strength of Q1 numbers and macroeconomic data even as more economic numbers are being expected. Just as dividend incomes had provided some level of liquidity that supported the uptrend witnessed before the profit taking. NGX rebounded at the end of midweek trading signaling entrance of funds into the equity space which needs to be confirm. As dividend payments and AGM meetings continued.

The NGX index’s action is trading above the T-line and 50-Day Moving Average exponential, as the index consolidates in the midst of selling sentiment and mixed momentum. As market players are looking to more corporate actions to position for dividend income. Although, we see fiscal and monetary policies trying to return the nation’s economy to the path of recovery, despite the continued mismatch of policies and implementation style as oscillating oil production output persist.

More Annual General Meeting notifications poured into the exchange, just as other companies presented resolutions from their shareholders meetings. The latest came from ETI and Industrial Medical Gas among others, while Airtel Africa continued to update the market on its share buyback and Notore Chemical industries appoints a new board chairman. Just as The Initiates Plc informed the market of its insiders dealing. In the midst of 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 market is side trending at a distribution phase, as revealed by candlestick formation and mixed momentum indicators. As ADX is looking down at 16.42, while RSI and Money Flow Index were mixed to read 52.61 and 55.30 points against the previous session 54.51 and 53.86points respectively. Market players should watch this current trend and trade with caution as oscillation  continue in the face of funds entering the market which need to be confirm as trading opens today. Also, trading volume pattern continued to oscillates, suggesting buying interest in some sectors and profit taking in others, with wait and see attitude.

To navigate the rest of the 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 were up on Thursday, as it continues its oscillation to trade at $79.24 per barrel in the midst of trader’s sentiment and expected easy in monetary policy from major central banks of the world. This expected to impact global demand and economic activities in the midst of mixed macroeconomic data from US and China the largest economies. As geopolitical tension across the globe remained a major threat to many economies and the commodity market and other factors that impact oil price as it continued to fall. This trend may likely continue in 2024, this up and down movement that drive volatility. As middle East conflict and war in Ukraine last.

Thursday’s trading started slightly in the upside before pulling back at the midday on profit taking in banking stocks and others to oscillate for the rest of the session. This pushed the NGX’s index to an intra-day low of 99,086.88bps from its highs of 99,297.56bps, before closing below its opening level at 99,134.85bps.

Market technicals for the session were weak and mixed, with higher volume when compared to the previous session in the midst of breadth favoring the bears slightly   on a selling sentiment as revealed by Investdata’s Sentiments Report showing 23% buy position and 77% sell volume. The total transaction volume index stood at 0.80 points, just as energy behind the day’s performance was relatively strong as Money Flow Index was up to read 55.30pts, from the previous day’s 53.86pts, indicating that funds entered the market, despite closing lower.

For you to successfully invest and trade in this volatile market in 2024, order for Investdata’s video on Buy & Sell Technical Analysis Toolbox to navigate the volatile market profitably, enhance trading decisions and boost your bottom line. Also, to up your game in stock trading and investing, understanding the key to trading price and index action will go a long way to make the difference in your trading results, check out the video materials above and prepare for Q3 Master Class.

Index and Market Caps

At the close of Thursday’s trading, the benchmark NGX All-Share Index fell by 149.53bps, closing at 99,134.85bps after opening at 99,284.36bps, representing a 0.15% drop. Market capitalization fell by N84.59bn, closing at N56.08tr from the previous day’s N56.16tr, which also represented a 0.15% value loss.

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 oversold range has increased as market correction and pullbacks 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.

The downturn was driven by profit taking in the shares of  Stanbic IBTC, Fidelity Bank, Maybaker, Transcorp, NB and Jaiz Bank among others. This impacted mildly on Year-To-Date gain which reduce to 32.58%. Market capitalization YTD gain stood at N11.18tr, representing 37.05% above its opening level for the year.

Mixed Sector Indices

Sectoral performance indexes were mixed after the NGX  Banking and Consumer goods  index closed lower by 1.30% and 0.09% respectively, while the NGX Insurance index closed higher by 1.66%, followed by Energy  with 0.28%. Just as NGX Industrial goods finished flat.

Market breadth was negative as loser’s outnumbered gainers in the ratio of 18:17, while transactions in volume and value were up after players exchanged 309.81m shares worth N5.38bn. Volume was driven by trades in Fidelity Bank, Accescorp,  Oando,  Guinness Nigeria and Veritas Kapital Assurance.

Oando and Eterna were the best performing stocks, gaining 9.77% and 9.67% respectively, closing at N14.05 and N14.75 per share respectively on market forces and sentiment. On the flip side, May/Baker and Fidelity Bank lost 10% and 9.72% respectively, closing at N6.03 and N9.75 per share, purely on profit taking.

Market Outlook

We expect mixed sentiments to continue as the week is likely to close lower, even as   portfolios repositioning persists in the midst of low valuation, dividend investing and reactions to Insurance corporate earnings, while taking advantage of pullbacks to position and rebalancing portfolio.

This is amid the volatility and pullbacks that 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