NGX: Expect Profit Taking, On Growth Slowdown, Amid Positioning For Earnings Season

Market Update for January 4

The bullish sentiments and winning streak on the Nigerian Exchange continued on Thursday as position taking persisted in major sectors and individual stocks with strong fundamentals, growth prospects and upside potentials for price movement even as the market is witnessing a slow in momentum while reflecting profit booking. Meanwhile, all eyes are still on the expected corporate earnings of quoted companies and the policy meeting of the Central Bank of Nigeria in this first month of 2024.

Trading on NGX opened for the year on a  positive note, changing the mixed outlook for 2024, even as the fiscal and monetary authorities are yet to give a clear direction of where they are headed. This is despite global economic trends, especially the geopolitical tensions, and fear of a recession, among others that will continue to influence investment decisions, while driving volatility.

The composite NGX All-Share index, again closed higher on a very high traded volume and positive market breadth, extending the bull transition for the fifth successive session and reflecting bargain hunting and portfolio rebalancing for dividend season and income. More companies have continued to notify the exchange of their board meetings and closed period for the 2023 full-year financials, amidst the January effects and other factors associated with the increasing economic headwinds.

The bull rage supported the index’s action at the end of the session, as the index broke out the 78,000 psychological line as mentioned in our update to trade above the T-line and all the Moving Averages on the daily, weekly and monthly time frame in the midst of volatile and positive sentiments. This was driven by the continued bargain hunting activities of positioning in value stocks at their current prices ahead of the NGX’s historical peak of earnings reporting season that comes with more liquidity, buying interest, earnings surprises and disappointments. The fixed income market rates/yields outlook remain mixed ahead of next week OMO and TB primary market auction being the first in the new year.

The NGX Index action candlestick formation at end of trading revealed a continuation of trend as funds are pushing prices higher on a huge traded volume, and at the same time sign of weakness as a result of profit taking that is underway, but needs confirmation as trading opens Friday. Therefore, investors should target companies with a consistent track record of dividend payment, strong fundamentals and growth prospects that will support further growth in earnings that price feed on in any market cycle. Technically, the index’s action had extended its markup phase in the face of a topping chart and bullish V-shape pattern that supports reversal or continuation of trend on a daily and weekly time frame, as the convergence between the index action and MACD on a dally chart supports continuation of trend.

Momentum indicators are still looking stronger since the beginning of the year, as the ADX read 55.16, just as, RSI and Money Flow Index 88.17 and 89.77 points respectively against the previous session’s 87.27 and 88.65 points . Volume trading pattern suggests the return of many players who had gone on holidays and institutional investors accumulating more positions as others investment windows returns remain below inflation.  As the anticipated financial market and economic reset in 2024, comes with huge opportunities to create wealth for smart investors and traders.

To navigate the rest of the quarter profitably using fundamental and technical analysis to run, join investdata live sessions at noon every Monday, Wednesday and Friday 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 oscillating volume of transaction witnessed in recent time, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”

Oil price oscillation continued, as it trades at $78.02 per barrel in the midst of inventory builds, outage at Libya’s largest producing field, geopolitical tension and attacks on the red sea. Even as conflict in middle east is taking another dimension, while the war in Ukraine and Russia has escalated to influence the global economic outlook. The geopolitical tension across the globe is a major threat to many economies. Also, oil supply cuts by OPEC and others are not making impact as oil prices closed lower in 2023. This trend may likely continue in 2024, this up and down movement of oil price also continues to drive volatility.

Meanwhile, Thursday’s trading opened on the upside and was sustained throughout the session, despite oscillating on buying interest in some stocks and profit taking in others, a situation that pushed the NGX’s index to an intraday high of 78,179.12 basis points from its lows of 77,544.52bps before closing above its opening level at 78,020.54 bps.

Market technicals were positive and strong, with higher volume of trade compared to the previous session in the midst of positive breadth and buying sentiment as revealed by Investdata’s Sentiments Report showing 75% buy position and 25% sell volume. The total transaction volume index stood at 1.97 points, just as momentum behind the day’s performance was strong as Money Flow Index looking up at 89.77pts, from the previous day’s 88.65pts, indicating that funds entered the market.

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Index and Market Caps

At the end of Thursday’s trading, the composite NGX All-Share Index gained 482.97 basis points, closing at 78,020.54bps after opening at 77,537.57bps, representing a 0.62% growth, just as market capitalization rose by N264bn closing at N42.69tr from the previous day’s N42.43tr, which also represented a 0.62%  appreciation in value.

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The upturn was driven by position taking in the shares of MTNN, Conoil, Transcorp, NB, ETI, UACN, GTCO, Zenith Bank, Dangote Sugar, Nascon and Oando, among others, which impacted positively on Year-To-Date gain of 4.34%. Market capitalization YTD gain stood at N1.584 trillion, representing 4.34% above its opening level for the year.

Bullish Sector Indices

All the sectorial performance indexes for the session closed higher, except the NGX Industrial Goods that closed flat, while NGX Insurance index led the advancers after gaining 2.62%, followed by Energy, Consumer goods and Banking with 0.73%, 0.55%, and 0.13% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 48:22; whereas transactions in volume and value were up, after stockbrokers traded 984.19m shares worth N11.16bn. Volume was driven by trades in FCMB, Fidelity Bank, Unity Bank, SterlingNG and Universal Insurance.

Wema Bank and Learn Africa were the best performing stocks, gaining 10% each, closing at N6.71 and N3.19per share respectively on market forces and expectation of earnings.  On the flip side, Multiverse and Meyer lost 9.97% and 9.75% respectively, closing at N20.22 and N3.24per share, purely on profit taking and selloffs.

Market Outlook

Being the last trading day of the week, we expect mixed sentiment on profit taking, as NGX crosses 78,000 psychological line on positioning by bargain hunters ahead of unaudited Q4 2023 numbers and volatility in the face of coming MPC meeting, as pullback at this point will add more strength to upside potential. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.

Ambrose Omordion

CRO|Investdata Consulting Ltd

Tel: 08028164085, 08179547605

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