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NGXASI May Range On Inflow Into Equity Assets

Market Update for December 23

Uncertainties and fear over the raging omicron variant of COVID continued to depress equity prices on the Nigerian Exchange Thursday, as the composite index remains on a range band, closing marginally lower. This was in the midst of positive economic data and corporate earnings that support positive sentiment ahead of Christmas on a low traded volume and candlestick formation that signal an imminent reversal of trend, as the Santa Claus rally disappeared ahead of the Christmas holidays. 

The prevailing low trading volume and mixed sentiments in a sliding market provide huge buying opportunities in value and dividend-paying stocks that had suffered losses this period. More so, they are stocks with strong prospects of growing their earnings in the future to support share prices and payout. However, the Santa Claus week did not produce any meaningful gain, so far but the fact remains that historical trends and patterns are there, as far as the year has not ended ahead of January effects. 

Technically, NGX index’s action had resisted further decline as revealed by the candlestick at the end of the day trading as investors sentiment improved marginally, despite trading below its 50-Day Moving Average. Also, the prevailing low traded volume reveals the ongoing low liquidity and absence of institutional players in the market. Momentum indicators for the day were mixed, just as the ADX is reading 21.64, RSI below the 50 at 46.96 and Money Flow Index looking up at 34.15 points on the daily chart. The continuation of this trend depends largely on the interplay of market forces and inflow of funds into the equity space as fixed income market yields direction remains unclear and flat. Thursday’s trading opened slightly on the downside and oscillated throughout the session on buying interests and selloffs in blue-chip stocks that pushed NGX index to an intraday low of 42,207.99 basis points, from its highs of 42,253.32bps and thereafter close below its opening point at 42,230.48bps.Market technicals were positive and mixed as volume traded was lower than the previous day’s in the midst of breadth favouring the bulls on a mixed sentiment as revealed by Investdata’s Sentiment Report showing 60% sell position and 40% buy volume.

The total transaction volume index stood at 0.68 points, just as energy behind the day’s performance remained relatively weak. Money Flow Index was flat at 34.15 points, from the previous day’s 34.73 points.  For you to successfully invest and trade in this market, order for Investdata’s video on Buy &Sell Technical Analysis Toolbox to navigate the rest of the year profitably, 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 Mkt Cap Movement At the end of Thursday’s trading, the All Share index shed 15.17 basis points, at 42,230.48bps after opening at 42,244.22bps, representing a 0.03% drop, just as market capitalization fell by N7.17bn, closing at N22.04tr, from the opening value of N22.05tr, also representing 0.03% in value loss. 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.

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Just as the session downturn was driven by selloffs in MTNN, Zenith Bank, Julius Berger, Honeywell Flour Mills, United Capitsl, FBN Holdings and UPDC, among others, which impacted mildly on Year-To-Date gain, as it reduces to 4.87%.

Market capitalization growth stood at N1.15tr YTD, representing a 4.70% Improvement on the year’s opening value.Mixed Sector Indices The sectoral indexes recorded a mixed performance, as the NGX Oil/Gas and Banking indexes closed 0.45% and 0.43% lower respectively, while the NGX Insurance led the advancers, after gaining 1.17%, followed by Consumer and industrial goods with 0.05% and 0.02% respectively.Market breadth remained positive as gainers outnumbered losers in the ratio of 14:11, while transactions in volume and value terms were down after investors exchanged 211.09m shares worth N2.45bn, compared to the previous day’s 224.03m units valued at N2.66bn. Volume was driven by trades in UACN, Sovereign Trust Insurance, GTCO, Jaiz Bank and Unity Bank.UBN and Royal Exchange Assurance were the best-performing stocks after gaining 9.78% and 7.74% respectively, closing at N5.05 and N0.75per share respectively on merger and acquisition market forces. On the flip side, Julius Berger and UPDC lost 9.73% and 5.56% respectively, closing at N22.36 and N1.18 per share, purely on profit taking.

Market OutlookWe expect the NGXASI to range at this level of 42,388.57 and 42,128.73 as inflow into equity space is looking up slowly on changing investment decision to keep this trend ahead of Christmas holidays.  As market players digest economic data and happenings in fixed income market after the NGX index action retraced to trade above its 50-Day Moving Average on a low buy volume in the face of assets rebalancing and seasonality likely to influence stock prices ahead of year-end window dressing.

 The relatively low volume traded in the midst of retracement is creating new buy opportunities on the strength of the Q3 numbers. Also, candlestick formation and volume traded during the session revealed that institutional players are not buying yet.  It is equally noteworthy that during a ranging market many players seat on the fence waiting for a breakout or down before jumping into any position. 

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