Mixed Sentiments Still, On Profit, Position Taking, As Pullbacks Add Strength To NGXASI Upside Potential

Market Update for December 20

Tuesday’s was a very volatile and mixed session on the Nigerian Exchange leaving the composite NGX All-Share index flat on a low traded volume and negative market breadth in the face of mixed sentiment and strong momentum. This extended the bull transition on a low impetus for the fifth consecutive day ahead of the Christmas holidays and year-end window dressing by market players wanting to close higher than it opened in the outgoing year.

Despite the market closing slightly higher, profit taking activities was obvious after the NGXASI formed a topping chart pattern that supports reversal or pullback that followed more than five weeks of Santa Claus rally on buying power across the major sectors of the market. Market players are already anticipating full-year financial reports, even as more companies continue to notify investors of their board meetings and closed period as a guide for investment decisions.

There is a seeming improvement in market fundamentals and mixed macroeconomic data in the face of a changing yield environment in the fixed income market as revealed by the recent TB primary market auction rates and yield which had suffered a decline across all tenors. Also, the time frame for realizing such yields in the equity space is shorter, as portfolio reshuffling continued with all eyes on the outcome of today TB primary market offer.

The oscillating volume pattern are ongoing in the face of the expected closed period notifications and release of the 2023 corporate actions. There are also ongoing position and profit taking ahead of the full-year earnings season, while bargain hunters and speculators take advantage of any pullback or selloffs to buy low amid a high volatility. Therefore, investors should target companies with a consistent track record of dividend payment with strong fundamentals and growth prospects that will support further growth in price and payout.

Technically, the market has slowed down its markup phase, signaling an imminent correction after forming a cup and handle chart pattern on a daily and weekly time frame.  But there is a divergence between the index action and MACD which also support profit taking. As such, let us keep our gaze on market forces and money flow.

Momentum indicators appear stronger, as the ADX read 53.89 at the end of the day, just as, RSI and Money Flow Index are looking flat to read 80.52 and 92.94 points against the previous session 80.52 and 92.95 points respectively. Volume trading pattern suggests the gradual return of many players who had been seating on the fence before now, including institutional investors holding cash to confirm the primary’s market direction, especially given the anticipated financial market reset in 2023, and beyond expected to create wealth for action takers are underway.

To navigate the rest of the year profitably using fundamental and technical analysis to run, join investdata live sessions at noon every 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 low volume of transaction witnessed, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”

Oil price oscillation continued, trading at $79.71 per barrel on EU gas price cap numbers are silly, as unclear cases of Covid 19 in China and its restriction or reopening in the midst of geopolitical tension and fear of recession as a result of high interest rate and inflation across the globe. Also, supply tightened due to the Russia-Ukraine war that has been lingering. The up and down movement of oil price also continues to drive volatility.

Meanwhile, Tuesday’s trading started on the upside, but oscillated powerfully for the rest of the session, on positioning and profit taking in some stocks, a situation that pushed the NGX’s index to an intraday high of 49,446.36 basis points from its lows of 49,382.43bps before closing marginally above its opening level at 49,416.18bps.

Market technicals were weak and mixed, with higher volume of trade compared to the previous session in the midst of breadth favoring the bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 53% buy position and 47% sell volume. The total transaction volume index stood at 0.63 points, just as momentum behind the day’s performance was strong as Money Flow Index looked up at 92.94pts, from the previous day’s 92.95pts, indicating that funds entered the market.

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Index and Market Caps

The NGX ASI inched up by 1.22 basis points at the end of the session trading, closing at 49,416.18bps after opening at 49,414.98bps, representing a 0.00%, just as market capitalization rose by N1.29bn closing at N26.91tr from the previous day’s N26.91tr, which also represented a 0.00% value gain.

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Meanwhile, the session’s upturn was driven by buying interests in the shares of Zenith Bank, Dangote Sugar, Ardova, Custodian, Eterna, Fidelity Bank, Vitafoam and CHI Plc, among others, which impacted mildly on Year-To-Date gain, increasing it to 15.68%. Market capitalization YTD gain increased slightly to N4.84tr, representing 20.71% rise over the opening level for the year.

Mixed Sector Indices

Sectorial performance indexes for the session were mixed as NGX Insurance and consumer goods closed 0.27% and 0.01% lower respectively, while NGX Banking led the advancers after gaining 0.27%, followed by energy with 0.22%. Just as NGX Industrial goods closed flat.

Market breadth was negative as losers outnumbered gainers in the ratio of 16:11; just as transactions in volume and value were up, after investors exchanged 100.09m shares worth N1.30bn. Volume was driven by trades in GTCO, CHIPLC, UBA, FTNCOCOA and Accesscorp.

Royal Exchange and Vitafoam were the best performing stocks, after gaining 5.95% and 3.57%, closing at N0.89 and N21.75per share respectively on market forces. On the flip side, Neimeth and SOCA lost 9.66% and 9.41% respectively, closing at N1.31 and N0.77per share, purely on profit taking and selloffs.

Market Outlook

We expect mixed sentiment and trend to continue on profit taking and positioning by bargain hunters ahead of holidays and year end seasonality in the face of election uncertainty, as pullbacks add more strength to upside potential. As such, investors should take advantage of price correction ahead of year end seasonality. Also looking at the trends and events across the globe and domestically.

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