Nigeria’s equity market struggled at its 16-year high last week after breaking out the 56,000 basis points psychological lines on an above average traded volume and positive market breadth for the week under review. This occurred in the midst of bearish dominance and mixed sentiment as a result of profit taking from the president speech rally that hit the market recently after the new administration inauguration.
The bearish divergence between the index action and momentum after forming double tops across the daily, weekly and monthly time frame is a sign that correction is underway as many stocks recently hit their 52-week high on a mixed volume pattern. Despite this expected pullback, the NGX index continued to trade above its big trend line since April 2020 on impressive performance of corporate actions.
At the current level of the market and continued sector rotation by market players as the reality of the fuel subsidy removal influencing company performances and its impact the economy negatively in the short-term, following which cost of living and production skyrocketed in recent time. With the market looking forward to more fundamental news in weeks to come, discerning investors and traders will continue to reposition their portfolio lines along companies with strong prospects for sustained positive performance, regardless of the economic situation due to the nature of their services and products. This is especially true of companies that enjoy inelastic demand, like the banks and telecom companies.
Let the charts and price actions below guide your profit booking and repositioning:
NGXASI Weekly Chart (opening)
NGX CONSUMER GOODS
NGX INDUSTRIAL GOODS
MAY & BAKER