Mixed Sentiments Still, Amid Profit Taking, Reactions To Earnings Inflow, MPC Outcome

Market Update for January   22

Trading activities on the Nigerian Exchange started the fourth week of the year on a mixed sentiment, extending the bull run for the eighth successive session, following the buying interest in industrial goods, energy stocks and others, in the midst of profit taking. Transaction volume was low, market breadth turned negative, just as corporate earnings continued to hit the market, with University Press and Bricklinks Africa Plc providing their unaudited 9 and 12-month results respectively. The top and bottom-lines of University Press  were as Earnings Per Share crawled to 53 kobo from the previous 51 kobo in 2022, while Bricklinks’ numbers came red, presenting a different scenario of the market from what the superlative performance showcased by Infinity Trust Mortgage for its full-year.

The mixed sentiment is coming ahead of more earnings expectations, as market players look forward to the outcome of this week’s TB and OMO auction rates as the Central Bank of Nigeria officially released the timetable of its monetary policy meeting for this year, six months after the last policy meeting in July 2023. Since then the equity market has remained a better option, as fixed income rates and yields continue oscillating, while the NGX year-to-date returns  stood at a robust 28.08% in only 15 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 94,538.12point to cross the 95,000 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 Cutix, Wapco, International Breweries, Mansard and others notified the NGX and investors of their board meetings and closed period for the 2023 full-year financials.

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 were revealed by momentum indicators, despite the overbought state of the market, as the ADX read 75.89, while RSI and Money Flow Index are looking flat to 94.18 and 88.92 points against the previous session 93.74 and 88.64 points respectively. This should be a concern for investors and smart traders as they trade caution. The trading volume pattern suggests hold and watch disposition of market players, as profit taking resurfaced again 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 Monday, amidst continued oscillation, to trade at $79.97 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.

Meanwhile, Monday’s trading opened on the upside and was sustained throughout the session, despite fluctuating on buying interests in building materials stocks, petroleum marketing companies and profit taking in others. This pushed the NGX’s index to an intraday high of 96,307.46 basis points from its lows of 94,538.12bps, before it closed above its opening level at 95,768.12bps.

Market technicals were positive and mixed, as volume of trade was lower 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 70% buy position and 30% sell volume. The total transaction volume index stood at 1.01points, just as energy behind the day’s performance was strong as Money Flow Index looking flat at 88.92pts, from the previous day’s 88.64pts, indicating that funds entered the market.

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Index and Market Caps

The NGX All-Share Index at the end of Monday’s trading gained 1,230bps, closing at 95,768.12bps after opening at 94,538.12bps, representing a 1.30% growth, just as market capitalization rose by N673.11bn, closing at N52.41tr from the previous day’s N51.74tr, which also represented a 1.30%  appreciation in value.

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.

Monday’s upturn was driven by position taking and accumulation in the shares of Dangote Cement, Unilever, UACN, Ucap, Honeywell Flour and FCMB, among others, which impacted positively on Year-To-Date gain of 28.08%. Market capitalization YTD gain stood at N8.84 trillion, representing 28.08% above its opening level for the year.

Mixed Sector Indices

Sectorial performance indexes for the session were mixed, as the NGX Industrial Goods and Oil/Gas indexes closed 5.15% and 0.55% higher respectively, while NGX Insurance index led the decliners after losing 2.53%  followed by Consumer and Banking with 1.48% and 0.90% 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, Veritas Kapital, Accesscorp, Universal Insurance and Japaul Gold.

Sunu Assurance and Dangote Cement were the best performing stocks, gaining 10% each, closing at N1.98 and N592.60per share respectively on market forces and entrance of major market player into the company.  On the flip side, Sovereign Trust Insurance   and University Press lost 10% each, closing at N0.54 and N3.60per share, purely on profit taking and weak earnings.

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

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605

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