Market Update for August 22
Stocks on the Nigerian Exchange continued to slide in the midst low liquidity and impressive corporate earnings that revealed value as bargain hunters try to cash in on pullbacks, despite selloffs and profit taking in some blue-chips, among others.
The week’s trading started on another negative note, as the composite NGX All-Share index closed slightly lower, on a low traded volume in the midst of negative market breadth and mixed sentiments. This was after breaking down the 61.8% Fibonacci retracement again to form a double bottom reversal pattern at the end of the day trading, which we wait to confirm as trading opens today.
In the current market situation, stock trading and investing need action plan to play today volatility. Have you even thought, you couldn’t trade or find opportunities to profit because the market is too volatile right now or too slow and ranging on the sideways? If we throw our hands in the air just because, we don’t have an optimal trading environment, we miss out, either on the opportunity to profit or learn and grow in our trading or both. In this phase of the market, one needs to change trading or investing strategies to adapt to the new market environment.
Here, try a new trading strategy or experiment. Do not be upset with the market mood. Track the new strategy to measure if you are making head ways, because the factors against the market are many now. You can equally, take break to watch the market because things are changing and some of them are beyond your control.
Meanwhile, market volatility continues to support technical traders in the midst of prevailing mixed sentiments, which was due to the corrective move and position taking by bargain hunters taking advantage of the prevailing relatively low prices of stocks and blue chip companies relative to value. This is especially true of those that suffered losses in the midst of the strong numbers posted by these companies, thereby revealing their undervalued state, as seen in the high dividend yields indicating the possibility of a higher payout as a hedge against the soaring inflation.
Despite the market pullback, accumulation is ongoing in some sectors and individual stocks, apart from selloffs in some other stocks and sectors. It is worthy of note that the current trend is creating ‘buy’ opportunities for discerning investors that understand stock market dynamics, especially as these companies’ earnings performance beat market expectations to indicate their inherent value and the cheap state of these stocks.
While we note the effects of the increasing global volatility as a result of rising rates, inflation, geopolitical tension and slowing consumer spending, there are however, pockets of strength in some sectors amidst impressive earnings releases that offer insights into strong group stocks with value in the industries and companies in the various sectors. There is the possibility of sectors beating the next quarterly estimates and predictions, attaining their pre-pandemic performances as they deal with capacity in the midst of soaring costs and insecurity.
The NGX index’s action still trades below the ‘T line’ and the 50-day moving average, within a consolidated range waiting for a trigger as sector rotation and portfolio rebalancing increased amidst expectation of interim dividend paying bank results to hit the exchange. It is, therefore, time to use technical tools, if you have been ignoring the charts and fighting the trends, it is your chance to step up your game. At this current market mood, investors and traders should target leaders in the various sectors with strong fundamentals, and positive technicals as the market reversal is underway depending on the earnings power.
To navigate this current market situation profitably using fundamental and technical analysis to run, join investdata live sessions at noon every 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 mixed sentiment witnessed, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”
Oil prices had continued to oscillates in recent days, as trade at $94.89 per barrel in the international market, following seasonal demand, US inventory report in the mixed of expected increase in supply of crude, china weak economic data and fear of recession that linger on increasing geopolitical tension. These are happening amidst the low factory activities in China, Japan and others that now signal demand fear, made worse by the weakened GDP in the US that may push the world’s largest economy into a technical recession. Already, central banks across the globe have continued to hike rates in the fight against rising inflation, in the midst of a sluggish economic growth data from China and others. All these have continued to influence the monetary policy options of central banks as they move to checkmate the impacts of the Russia-Ukraine conflict on the global economy to avoid the looming economic recession.
Meanwhile, Monday’s trading opened slightly on the upside and oscillated for the rest of the session on selloffs and position taking in stocks that suffered losses recently, a situation that pushed the NGX’s index to an intraday low of 49,334.23bps from its highs of 49,381.15ps, before closing below its opening figure at 49,346.46bps.
Market technicals were negative and mixed, with lower volume of shares traded than the previous day in the midst of breadth favoring bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 26% buy volume and 74% sell position. The total transaction volume index stood at 0.72points, just as impetus behind the day’s performance was relatively weak as Money Flow Index is looking down at 48.35pts, from the previous day’s 53.63pts, indicating that funds left the market.
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Index and Market Caps
The benchmark All Share index, at the end of Monday’s trading, shed 23.18bps, closing at 49,346.46bps, after opening at 49,370.62bps, representing a 0.05% drop, just as market capitalization fell by N13.99bn, closing at N26.62tr, from the previous day’s N26.63tr, which also represented a 0.05% value loss.
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The session’s downturn was driven by selloffs and profit taking in NGX Group, Oando, GTCO, UBA, ETI, Africa Prudential, MRS Oil and Lasaco, among others, which impacted mildly on Year-To-Date gain, reducing it to 15.52%. Market capitalization gain YTD also rose to N3.20tr YTD, representing a 19.54% rise over the opening level for the year.
Mixed Sector Indices
The sectorial performance indexes were mixed, with the NGX Consumer and Industrial Goods closing higher by 0.07% and 0.02% respectively, while NGX Banking led the decliners after losing 0.69%, followed by Insurance and Energy with 0.11% and 0.07% respectively.
Market breadth remains negative as losers outnumbered gainer in the ratio of 19:9; just as activities in volume and value terms were down, after investors exchanged 122.74m shares worth N1.30bn, with volume driven by trades in Mutual Benefits Assurance, Transcorp, GTCO, Sterling Bank and Accesscorp.
Courtville Business Solution and Honeywell Flour were the best-performing stocks, gaining 9.09% and 8.68% respectively, closing at N0.48 and N2.63per share respectively on market forces. On the flip side, FTNCocoa and Lasaco lost 9.09% and 8.65% respectively, closing at N0.30 and N0.95 per share, purely on profit taking and selloffs.
We expect a mixed trend to continue on price adjustments for interim dividend, as well as bargain hunting in the midst of oscillating sentiments that had continued on portfolio reshuffling and sector rotation on bargain hunting as players interpret July inflation of 19.64% and impressive half-year results in expectation of more company’s scorecards, especially from the first-tier banks in the midst of sovereign risks, as all eyes are on interim dividends.
We note also the flow of funds into the fixed income segment on the rate hike by the CBN, as sector rotation persists. Analysts are also focused on the lookout for Q2 GDP and flow of funds amid oil prices oscillation. Also, the market continues to interpret the rising inflation in relation to the crude oil price and other factors, in the midst of profit-taking and portfolio rebalancing. This will result in market players targeting fundamentally sound and dividend-paying stocks in the hope of dividend announcements.
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