Mixed Trend Ahead, As June inflation report, Q2 Earnings Season Beckon

Market Update for July 14

The composite index, on Tuesday continued it mixed intraday movement and volatility, remaining on the bearish wave as selling pressure heightened, extending the losing stance for the second consecutive session on a high traded volume and negative breadth. The two moving averages of 20 and 50-Day crossed each other at the close of Tuesday’s trading, further confirming the bearish mood of the market, just as more companies notified the investing public of their closed period and board meetings to approve the half year earnings reports.

The banking stocks’ rally faded away, halting its rebound on investors’ anxiety and fear of the Q2 numbers depressing the market further, while economic fundamentals continue to wobble, given the clear lack of coordinated economic policies and by the monetary and fiscal authorities.

Buyers in the market appear to be fearful, ahead of the oncoming earnings season as technical indicators show mixed signals in the face of weak economic fundamentals, while the Money Flow Index is pointing southwards.

However, sectoral rotation is seemingly ongoing as investors move their funds to less volatile sectors and stocks.  The banking sector slowdown at this point is creating opportunity to buy lower at the support level, looking at the value area as discussed in the mastering earnings season for profitable trading and investing in any market situation or cycle.

Meanwhile, Tuesday’s trading started on the downside in the morning and rebounded in the midday to early afternoon, before oscillating in the late afternoon on continued profit taking in banking stocks, and selloffs in Oil/gas stocks. These pushed the benchmark NSE All-Share Index to an intra-day low of 24,114.59 basis points, from its high of 24,306.36bps, before closing the day lower at 24,114.59bps.

Market technicals were negative and weak as volume traded was lower than that of the previous session in the midst of negative breadth and high selling pressure as revealed by Investdata’s Daily Sentiment Report showing a ‘sell’ volume of 100%. Total daily transaction volume index stood at 0.97, just as energy behind the day’s performance stayed weak, with Money Flow Index reading 35.64 points, as against the previous 35.85ps, indicating that funds left  the market on continued selloffs.

Index and Market Caps

At the end of the day’s trading, the NSEASI lost 86.01 basis points, closing at 24,114.59bps, after opening at 24,200.60bps, representing a 0.36% drop, similarly market capitalization was down N44.87bn, closing at N12.58tr, from an opening value of N12.62r, representing 0.35% value loss.

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Tuesday’s decline followed losses recorded by Guaranty Trust Bank, Zenith Bank, Access Bank, UBA, Ecobank Transnational Incorporated, GSK and Africa Prudential, which impacted negatively on the NSE’s benchmark index’s Year-To-Date loss position which increased to 10.20%, just as market capitalization YTD loss stood at N368.56bn, representing a 2.94% drop from the year’s opening level.

Mixed Sector indices                                                                     

The sectorial performance indexes were largely bullish except for the NSE Banking and Oil/Gas  index that closed 2.80% and 0.42% lower  respectively, while NSE Consumers goods  indexes led the advancers  after gaining  0.44%, followed by NSE Industrial goods and Insurance which were up by 0.25% and 0.14% respectively.

Market breadth remained negative as decliners outnumbered advancers in the ratio of 15:8, while activity in volume and value terms dropped by 9.96% and 50.86% respectively, after investors exchanged 208.2m shares worth N1.06bn, from the previous day’s 231.23m units valued at N2.15bn. The day’s volume was driven by trades in Sterling Bank, UBA, Japaul Oil, FBNH and  Zenith Bank.

Unilever and ChamsPlc were the best performing, after gaining 9.64% and 4.55% respectively, closing at N13.65 and N0.23 per share on low price attraction and market forces. On the flip side, Arbico and GlaxoSmithKline lost 9.94% and 9.38%, closing at N1.54 and N4.35 per share respectively on selloffs and profit taking.

Market Outlook

We expect the mixed intraday trend and bearish wave to continue as the earnings season kicks off any moment from now ahead of June inflation report, and the Monetary Policy Committee meeting, while inconsistent government policies continue to dampen investor confidence ahead of the expectedly disappointing half-year corporate earnings reports. This is likely to support the wave of decline as pullbacks persist, creating new entering opportunities. Money flow index has continued to look down at 35.64, despite flowing from one sector to the other, seeking value in terms of low prices with high upside potentials.

This is just as economic recovery is threatened by the rising cases of the COVID-19 pandemic, ahead of the Q2 earnings reports season, which implies that opportunities are still available as sectoral rotation continues. Also, sectors that have suffered oversold, so far, offer attractive risk-reward buy-opportunities and outlook for considerable short, medium and long term investment.

For immediate liquidity or cash we advice that you trade low priced stocks with serious caution to avoid being trapped. However, the market’s high dividend yield continues to attract buying interests, as few audited and unaudited corporate earnings will hit the market, going forward. This is despite the likely continuation of selloffs. Investors are buying to increase their positions in undervalued stocks ahead of Q2 numbers. It is also against the backdrop of the fact that the capital wave in the financial markets may persist in the midst of relatively low-interest rates in the money market, high inflation, and unstable economic outlook for 2020.

Again, the current undervalued state of the market offers opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation going forward. Also, traders and investors need to change their strategies, because of the NSE’s pricing methodology, the CBN directives, and their impact on the economy in the nearest future.

NB:The home study packs and videos that will help you prepare and take advantage of the current happening in the market and economy are available at Investdata. How to invest or trade profitably in changing market dynamics and recession. Mastering earnings season for profitable investment To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085,08032055467, 08111811223 now.

 Ambrose Omordion

CRO|Investdata Consulting Ltd





Tel: 08028164085, 08032055467

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