Mixed Sentiments Yet, Amid Low Valuation, Reactions To Insurance Earnings, Pullbacks

Market Update for June 5

Midweek’s trading on the Nigerian Exchange was mixed once again, thereby halting the previous two successive sessions of bear transition on a low traded volume and negative market internals, as the benchmark NGX All-Share index closed marginally higher on buying sentiment across some major sectors. This supported the market positively amid the inflow of more March year-end audited scorecards, just as more companies released their Q3 earnings forecast to guide discerning players. The latest was from Eterna, which led the top gainers at the end of the trading session, as investors reacted positively to the numbers.

There was also the impact of the outcome of the Treasury Bills primary auction as rates/yields remained relatively flat for the 91-day and 364-day tenors of 16,5% and 20.67% respectively, while the 182-day tenor inched up to 17.50%, ahead of another maturity date. This is expected to provide more funds, a situation that may continue to drive  sector rotation and portfolio rebalancing in preparation for the second half of the year, at a time service oriented companies like banks, insurance, telecoms, aviation and tech companies, among others are experiencing a slowdown in their numbers thereby supporting their prices in future. Meanwhile, more positive numbers continue to hit the market however.

Stock trading comes with volatility that 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 dates, is another trading strategy in equity trading. As 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. 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 retraced up in the midst of buying sentiment and positive 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 VFD Group and Caverton among others, while Airtel Africa continued to update the market on its share buyback and exchange rate for 3.57cent dividend. Just as Oando informed the market of the lifting of suspension on its securities on JSE. 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 had signaled return of strength, as revealed by candlestick formation and mixed momentum indicators. As ADX is looking down at 17.17, while RSI and Money Flow Index are up to read 54.51 and 53.86 points against the previous session 51.99 and 53.71points respectively. Market players should watch this current trend and trade with caution as position taking 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 rebounded at midweek, as it continues its oscillation to trade at $78.41 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.

Meanwhile, Wednesday’s trading session opened slightly in the red before rebounding in the afternoon on position taking in banking stocks and blue chip companies. This pushed the NGX’s index to an intra-day high of 99,284.38bps from its lows of 98,893.55bps, before closing above its opening level at 99,284.38bps.

Market technicals for the session were positive and mixed, with lower volume when compared to the previous session in the midst of breadth favoring the bears on a buying pressure as revealed by Investdata’s Sentiments Report showing 100% buy position and 0% sell volume. The total transaction volume index stood at 0.81 points, just as momentum behind the day’s performance was relatively strong as Money Flow Index was inched up to read 53.86pts, from the previous day’s 53.71pts, indicating that funds entered the market.

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Index and Market Caps

At the close of the day’s trading, the composite NGX All-Share Index gained 233.36bps, closing at 99,284.36bps after opening at 99,051.02bps, representing a 0.24% up, just as market capitalization rose by N132.01bn, closing at N56.16tr from the previous day’s N56.03tr, which also represented a 0.24% 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 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.

Meanwhile, the downturn was driven by profit taking in the shares of Zenith Bank, FBNH, UBA, NB, Mansard, Cornerstone, Unity Bank and Jaiz Bank among others. This impacted mildly on Year-To-Date gain which slide to 32.56%. Market capitalization YTD gain stood at N11.12tr, representing 36.38% above its opening level for the year.

Mixed Sector Indices

Sectoral performance indexes were mixed after the NGX  Insurance and Industrial goods   index closed lower by 1.49% and 0.01% respectively, while the NGX Banking index closed higher by 2.46%, followed by Energy and Consumer goods with 0.265 and 0.15% respectively.

Market breadth was negative as loser’s outnumbered gainers in the ratio of 23:18, while transactions in volume and value were dwon after players exchanged 308.14m shares worth N4.86bn. Volume was driven by trades in Fidelity Bank, Oando, Veritas Kapital Insurance, Unity Bank and Transcorp.

Eterna and Redstar Express were the best performing stocks, gaining 9.80% and 9.76% respectively, closing at N13.45 and N3.71 per share respectively on market forces and sentiment. On the flip side, Oando and Linkage Assurance lost 9.86% and 9.41% respectively, closing at N12.80 and N0.77 per share, purely on profit taking.

Market Outlook

We expect mixed sentiments to continue as players rebalance their portfolios 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