Mixed Trend Ahead, Amid Profit Booking, As Investors Position On Corrections
Market Update for the Week Ended October 8 and Outlook for 11-15
The first full trading week of October and the last quarter of the year 2021 had a bull-run and positive buying sentiment, closing the period higher and thereby extending the fourth consecutive week of positive outing. The week also saw a very high traded volume that indicates accumulation of position and inflow of funds into equity assets ahead of the earnings reporting season and seasonality associated with year-end.
The positive sentiment and chart pattern formation on the weekly and daily chart revealed the possibility of continuation of this trend as release dates for early filers draw closer, despite the likelihood of profit-taking in the new week and market reaction to the expected corporate earnings expected to hit the market any moment from now.
As the market gradually enters another phase of markup that supports the recovery movement, this period calls for an effective combination of fundamental and technical analysis to stay ahead of the market, with technical barometers assisting with entry and exit timing, as well as top-down and bottom-up used to identify our levels of breakout or breakdown. These technical tools are applied to the general market, sector rotation, and stock selection.
Every year, the makeup and number of sectors that outperform the key performance index NGX changes. This year 2021, five sectors: banking, agriculture, oil/gas, industrial goods, and communication services outperformed the NGX index as of the end of Q3, compared to the last year 2020 when only the Industrial Goods outperformed the composite index within the same period. As we journey into the rest of this year, the issue becomes how this Q3 performance will impact Q4, being the last quarter of the year, knowing that past performance does not assurance for future performance. It is noteworthy also that traders and investors don’t ignore classical chart patterns in any market cycle, because it makes the difference in boosting your bottom line.
The NGX index action on a weekly chart reveals a positive momentum of 98% in investor sentiment, ADX above 20point to read 23.94, just as the money flow index was looking up at 64.84to show a relative money flow in the market. These are indications that confirm the daily move and volatility, as the NGX index is set to breakout new resistance levels of 40,884.80bps to 41,014.58 bps and then confirm the continuation of uptrend on the daily and weekly time frame. So, we have to wait and see what happens in the new week and ahead of early filers of corporate earnings.
The rise in transaction volume, during the week on the off-market deal of FBN Holdings, is an indication that investors are gradually returning to the market after studying the latest macroeconomic data and happenings in the system ahead of the earnings reporting season and year-end. Also, liquidity is returning to the stock market, just as the oil price is looking up in the international market to support the market and economic fundamentals.
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Movement Of NGXASI
Trading for the week recorded a bullish trend with five sessions of upmarket largely driven by positive sentiments for banking stocks and the news of Airtel Africa share buyback. The NGX index started the period on a positive note, extending the previous day’s gains of quarter-end window dressing with 0.12%, which was extended throughout the trading week, gaining 1.53% on Tuesday. At the midweek, the index notched 0.24%, followed by 0.28% and 0.21% on Thursday and Friday respectively, which brought the week’s total gain to 1.61%, compared to the previous week’s 3.23% positive position.
Consequently, the All-Share Index grew by 647.17 basis points, closing at 40,868.36bps from its opening level of 40,221.17bps, after touching an intra-week high of 40,884.80bps from its lows of 40,221.17bps on positive sentiments for low, medium, and high priced stocks. Market capitalization during the period rose by N340bn, closing at N21.30tr, compared to the previous week’s N20.96tr, which also represented a 1.62% in value gain, different from index gain as a result of the listing of additional 5.08 billion shares of Jaiz Bank at 0.65 kobo.
As usual, the advancers’ table for the week was dominated by low and medium-priced stocks which had become the toast of investors, particularly University Press, FBNH, Courtville, Ecobank Transnational Incorporated, Pharm-Deko, Eterna, Livestock Feeds, and NPF Microfinance, among others. This was due to continued repositioning ahead of Q3 earnings season and Q4 seasonality, even as the NGX Index and price actions revealed the presence of buyers in the market, a situation that reflects on the sectorial indexes.
Market breadth was positive on a very high traded volume to support the recovery and signal position-taking by market players, with gainers outnumbering losers in the ratio of 42:26, on a positive sentiment as revealed by investors’ sentiment report showing a 98% buy volume and 2% sell position. Money Flow Index rose to 64.84bps from the previous week’s 63.11 points, an indication that some funds entered the market.
NSEASI WEEKLY CHART MOVEMENT
The NGX index’s action, on a daily and weekly chart, had formed an inverted head and shoulder chart pattern that support and signals an uptrend on a high traded volume. The candlestick pattern at the end of the week was a bullish setup that represents buyers in charge, as the benchmark index maintained four successive weeks of positive outings to reveal the return of players after sitting on the fence. The index action has broken out of its consolidating rectangle on renewed buying interest that supports uptrend. However, we need to watch out, as market players digest economic data, fixed income market yields, and oil prices that should further support market fundamentals to attract liquidity to the equity space. A pullback at this point will create a new buying opportunity.
Mixed Sectoral Indices
The performance indexes across the sector were mixed, with the NGX Insurance and Consumer goods closing 1.51% and 0.51% lower respectively, while NGX Banking led the advancers after gaining 4.53%, followed by Oil/Gas and Industrial goods with 0.24% and 0.11% respectively. Activities in volume and value terms were also mixed, as players exchanged 2.18bn shares worth N21.96bn, compared to the previous week’s 2.19m units valued at N16.18bn. Volume was driven by Financial Services, Conglomerates, and ICT, particularly FBN Holdings, Universal Insurance, Fidelity Bank, Zenith Bank, and Transcorp.
University Press and FBN Holdings were the best-performing stocks during the week, after gaining 28.46% and 21.74% respectively, closing at N1.58 and N9.80 per share respectively on positive market sentiments and forces. On the flip side, Cornerstone Insurance and Morison Industries lost 12.07% and 10% respectively, at N0.51 and N1.89 per share, purely on profit-taking.
Outlook for the week
We expect a mixed trend on profit-booking, as bargain hunters take advantage of price correction in fundamentally sound stocks to position, just as fund and portfolio managers are positioning ahead of Q3 earnings season and year-end. As many stocks remain in their buy range to attract funds into the equity space. Also, investors are still observing the interplay of forces in the FX market as the CBN gives a guideline for the new digital currency platform. Last week high volume suggests that institutional investors are entering the market and others. It is noteworthy that oil prices rebounded to trade above $82 in the international market; corporate actions, as well as the interim dividend possibilities, are around the corner.
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