Mixed Trend Ahead, Amid Profit-Taking, Positioning For Q3 Earnings
Market Update for October 4
Equity prices closed higher on the Nigerian Exchange on Monday, despite recording a mixed session and trend to kick off the new month on a positive note, as the benchmark index NGXASI inched up while other sectorial indexes booked mixed performance on the first trading session of the week and month to slow down the quarter-end high momentum and volume traded. This was also on the impact of portfolio repositioning ahead of the Q3 earnings reporting season, as the benchmark All-Share Index turned positive year-to-date.
The positive macroeconomic indices continued to emanate, despite the seeming weak economic recovery as productivity and industrial output remain on the decline in the face of weak capital formation and crisis in the foreign exchange market. Economic activities in September expanded slightly as Purchasing Managers index stood at 52.3 points against the August position of 52.2 points, according to a report by Stanbic IBTC Research indicative of 15 consecutive months of expansions. Central to this notable improvement is the solid and accelerated rise in new orders, which panelist mostly linked to securing new clients by manufacturers as the economy opens up further. In contrast to improvement in domestic sales, exports fell even at the fastest rate since December amid persisting international COVID-19 restriction.
Historically, according to Investdata Research, the October performance pattern is on 50:50 ratios in the last two decades, despite being the month when buying stocks, position-taking, and the Q3 earnings reporting season month. In the 20-year period, the NGX index action recorded 10 years of upmarket and 10 years down, meaning that the state of Q3 corporate earnings performance and liquidity level as a major fundamental of equity market determines where the pendulum will swing. So far, stocks like United Capital, Pharma-Deko, FBN Holdings, University Press, Consolidated Hallmark Insurance Plc, Livestock Feeds, and others have broken out their minor and major resistance as others make new highs.
The NGX index sustained upward movement on Monday a breakout of 40,367.31 and 40,572.31 basis points resistance levels will turn the market into a positive position from a marginal YTD loss of 0.07%. That was an extremely strong resistance level that will usher in a new uptrend in the new month and quarter despite one Treasury Bills inched up by 30 points in the last auction. What we would like to see is a strong follow-up in October which takes the NGX index straight above the next resistant levels of 40,367.33bps like it doesn’t exist. After that, we should see a slight pullback on profit-taking in the first or second trading week of October before the Q3 numbers starting hitting the market as more companies notify investors of closed periods and board meeting dates. The state of the expected earnings reports and level of liquidity in equity space will determine the possibility of another rally in the new month and quarter. The two and three-year savings bond rates of 6.9% and 7.9% respectively should not threaten the equity market for now, until we see anything to the contrary. The money flow index crossed 70 points to 72.28 points at the end of Monday’s trading.
Investors should hold onto their high value and growth stock positions, even as the direction of the fixed income market yields and rates is still not clear, this is not unexpected as funds flow to where there are higher returns.
Meanwhile, Monday’s trading started slightly on the upside and was sustained throughout the session, on positioning and profit-taking which pushed the NGX index to an intraday high of 40,266.46bps, from its lows of 40,221.17bps, after which it closed slightly above its opening points at 40,243.05bps on a low traded volume.
Market technicals were positive and mixed as volume traded was lower than the previous day’s, in the midst of positive breadth and mixed sentiments as revealed by Investdata’s Sentiment Report showing 48% ‘buy’ position and 52% sell volume. The total transaction volume index stood at 0.80 points, just as the momentum behind the day’s performance was relatively strong, with Money Flow Index looking up at 72.28points, from the previous day’s 66.58points, indicating that funds entered the market.
To navigate the new month and rest of the year profitably, order Investdata’s video on Buy & Sell Technical Analysis Toolbox to enhance trading decisions and boost your bottom line. Also, to up your game in stock trading and investing, understanding the key to trading price and index action will go a long way to make the difference in your trading results, check out the video materials below.
Index and Market Caps
The composite index NGXASI, at the end of Monday trading, gained a marginal 21.88 basis points and closed at 40,243.05bps from an opening figure of 40,221.17bps, which represented 0.05% up, just as market capitalization rose by N14.45bn, closing at N20.97tr, from the opening value of N20.96tr, also representing 0.07% in value gain, as a result of the listing of additional 5.07bn ordinary shares in favour of Jaiz Bank.
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 buying range has just increased to 30 as they build a new bullish base and positive chart patterns to be on our watchlist. These stocks have double potentials to rally, considering their earnings prospect and the recovery move of the market at this time.
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 to stimulate and re-track the economy to the path of growth and development.
The session upturn was driven by buying interests in stocks like GTCO, UBA, FBNH, Zenith Bank, Eterna, Honeywell, Derogate Sugar United Capital, Mansard, Pharma-Deko, and University Press, among others, which impacted positively on Year-To-Date loss that dropped to 0.07%. This was just as the cumulative loss in market capitalization fell to N76.31bn, representing a 0.26% decline from the year’s opening value.
Mixed Sector Indices
Performance indexes across sectors were mixed, as NGX Oil/Gas and Industrial index that closed 0.38% and 0.12% down respectively, while the NGX Insurance Index led the advancers table, after gaining 1.53%, followed by the Consumer goods and Banking with 0.05%, and 0.01% respectively.
Market breadth was positive, after gainers outnumbered losers in the ratio of 23:14, while transactions in volume and value terms were down, as market players exchanged 202.36m shares worth N1.86bn, compared to the previous day’s 1.05bn units valued at N7.42bn. Volume was driven by trades in Fidelity Bank, GTCO, FBNH, Universal Insurance, and Champion Breweries.
Mansard Insurance and Pharma-Deko were the best performing, gaining 9.87% and 9.79% to close at N2.56 and N2.58per share respectively on low price attraction and expected Q3 earnings report. On the flip side, Morison Industries and NNFM lost 10% and 9.94% respectively, closing at N1.99 and N7.70 per share purely on profit-taking.
We expect a mixed trend on profit-taking and positioning for Q3 numbers that is around the corner as candlestick formation remains bullish as revealed by momentum indicators, just as investors and traders take advantage of likely pullback to accumulate more position ahead of the earnings reporting season. Also noteworthy is the fact that many stocks are trading within their buy ranges, a situation expected to attract more funds into the equity space, given the Dividend Yield capable of serving as a hedge against inflation.
Also, institutional investors and others continue to digest recently release economic data, the outcome of the Treasury bill auction were 91 and 182 days tenor rate remain unchanged and 364 days slightly up by 30points to 7.50% for a whole one year ahead of last quarter and year-end repositioning of portfolios. Also, investors are still observing the interplay of forces in the FX market as the CBN postpones the lunch of the new digital currency platform. The day’s high volume suggests that institutional investors and others are gradually taking a position in the market, as they look at the economic data and policy direction of the economic managers. It is noteworthy that oil price pullback in the international market; corporate actions, as well as the interim dividend possibilities, are around the corner.
Meanwhile, the home study packs on Comprehensive Stock Market trading course video, Stock Market Analysis Beyond Fundamental & Technical Analysis, INVEST 2021 New Opportunities & New Paths To Profits Summit materials and 10 Golden Stocks for 2021, Strategies and How to invest profitably in this Changing Market Dynamics/ Recession, Mastering Earnings Season For Profitable Investing and Trading in any market situation/ cycles, Life Beyond COVID 19 Investment Opportunities In The Stock Market are now available. To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085, 08179547605 now.
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605