Market Update for November 21
Profit taking resurfaced on the Nigerian Exchange on Thursday, as selloffs hit banking stocks and highly priced companies which pulled the composite NGX All-Share index lower on a less than average traded volume and positive market internals, thereby halting four consecutive sessions of bull transition. Smart money continued to strategically position in the market ahead of the Central Bank of Nigeria’s policy meeting next week and end of the year seasonality.
The pullback amid an oscillating volume pattern and funds entering the market and individual stocks, signal positioning that should guide investors and traders as per where to position with the ongoing developments in the economy and the direction of exchange rate that have so far impacted some sectors and stocks negatively. Managers of the economy at this point may need to rethink their strategies, or continue to trade the economy of the nation for foreign inflow with high interest rate that is driving low productivity and failed to checkmate the runaway inflation of today.
Meanwhile, the distribution phase and recovery of the market needs confirmation, as the index had formed a top chart pattern in an uptrend at the end of trading on Thursday. Just as Aradel Holdings and McNichols informed NGX of its insider dealings during the session. Money flow and other momentum tools continued to look up, as the pullback presents buy opportunities for bargain hunters who understand the importance of buying low and selling high in any market condition in the midst ongoing volatility. This is particularly true now that many stocks on the NGX are undervalued with high upside potentials, while investors carryout sector rotation on the strength of economic events and quarterly earnings reports that reveal the states of various companies on the NGX.
The selling sentiment occurred in the midst of reversal chart pattern and retracement from resistance level of 98,242.49 basis points and 98,249.39ps, after forming a topping-tail candlestick in an uptrend. This created the perfect setup for high probability of reversal or continuation to catch end of year repositioning at the right price. Also, the index is trading above the T-line and the two moving averages of 50-EMA and 50-SMA, this indicate relatively strong momentum in the midst of changing market fundamentals and technicals on the NGX and the economy.
Technically, the NGX is in a distribution phase as sellers dominated in the face of recovery and selling sentiment, as candlestick formation and momentum indicators reveal a somewhat weakness and strength in the market. ADX looked up to read 25.36 points, while RSI and Money Flow Index were mixed at 53.95 and 33.16 points against the previous session’s 56.53 and 31.11 points respectively. Consequently, market players should watch this current trend and trade wisely in the face of funds returning to the market on a selling sentiment in some sectors and position taking in others. Also, trading volume pattern continued to oscillates, suggesting buying interest and selloffs in the market amid players revaluing the market and policy direction of the government that look confused.
To navigate the rest of this quarter and beyond profitably, running with fundamental and technical analysis, 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 on Thursday inched up to continued its oscillation, trading at $74.34 per barrel in the midst of Ukraine war escalating with Russia ballistic missile and uncertainty of OPEC production policy due to ongoing geopolitical tensions in the Middle East. As demand outlook remained mixed in the midst of rate cuts by the major central banks of the world and unclear policies of Trump second term. The rising geopolitical uncertainties across many economies remains a threat to the global economy and energy consumption. This trend may likely continue for the rest of 2024, while the up and down movement continues to drive volatility, even as the raging war between Ukraine and Russia continues to influence global oil supply and demand.
Meanwhile, Thursday’s trading started slightly in the green before pulling back for the rest of the session on profit taking and selloffs that hits blue chip companies and other stocks. Despite the buying interest in some stocks, a situation pushed the NGX’s index to an intra-day low of 97,992.55bps from its highs of 98,249.39bps, before closing below its opening level at 97,992.55bps.
Market technicals were weak and mixed with higher volume when compared to the previous session in the midst of breadth favouring the bulls on a selliing sentiment as revealed by Investdata’s Sentiments Report showing 6% buy position and 94% sell volume. The total transaction volume index stood at 1.08 points, just as impetus behind the day’s performance was weak as Money Flow Index inched up to read 33.16pts, from the previous day’s 31.11pts, indicating that funds are entering the market at this oversold region. Despite closing in the red.
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Index and Market Caps
At the end of trading, the benchmark NGX All-Share Index shed 207.38 basis points, closing at 97,992.55bps from 98,227.50bps, representing a 0.24% drop, while market capitalization fell by N142bn, at N59.40tr from the previous day’s N59.53tr, representing a 0.24% value loss.
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The session downturn was driven by profit taking and selloffs in the shares of Presco, Oando, Unilever, UBA, Zenith Bank, GTCO, Japaul Gold and University Press, among others. This impacted mildly on Year-To-Date gain as it inched up to 31.05%, while Market capitalization gain stood at N15, 13tr, representing 45.15% growth over its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed, as the NGX Banking and Energy indexes closed 1.16% and 0.33% lower respectively, while NGX Consumer goods index led the advancers after gaining 0.39% followed by Insurance and Industrial goods with 0.26% and 0.21% respectively.
Market breadth was positive, as gainers outnumbered losers in the ratio of 33:24, while transactions in volume and value were up after investors exchanged 467.68m shares worth N9.59bn. Volume was driven by trades in FBNH, Tantalizer, Wapco, Fidelity Bank and Zenith Bank.
Austin Laz and Eunisell were the best performing stocks, gaining 10% and 9.98% respectively, closing at N2.42 and N17.52 per share respectively on the back of sentiment and market forces respectively. On the flip side, Wapic and University Press lost 9.82% and 9.09% respectively, closing at N1.01 and N3.50per share, purely on profit taking and selloffs.
Market Outlook
We expect mixed sentiments to continue on profit taking, bargain hunting, low valuation and position taking by smart money for year-end. Also, sector rotation and portfolio rebalancing continued in the market with investors taking advantage of pullbacks and correction to buy into value.
This is amid the volatility and pullbacks that add more strength to upside potential. Consequently, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.
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- The Place Of Corporate Earnings In Trading & Investing For Retirement, by Mr Kebira Jimoh Aruna, MD/CEO GlobalView Capital Ltd
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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
08028164085
