Market Update for August 21
Trading activities on the Nigerian Exchange at the midweek recorded was mixed, reversing the previous day’s gain on selling sentiment that weighed on the composite NGX All-Share index which closed marginally lower in the midst of a low traded volume and positive market internals. The lower than average volume is a sign of weakness. If the transacted volume on the next session is higher weakness increases.
At the current market situation, the NGX’s direction is very important to guide your investment decision as you trade your plan by knowing when to enter and exit trades to profit from the moves on the exchange. What the market is doing now is a slow bleed or dead cat bounce, waiting for a real trigger to confirm a clear direction. Just as NGX continued to trade around the strong support level of 95,843.10 and below psychological line of 96,000 is a sign of buy zone opportunities for discerning investors and traders who desire to buy into value.
The outcome of the Treasury bills’ auction, where the rates across all tenors fell to 18.20%, 19.20% and 20.90% for the 91-Day 182-Day and 364-Day respectively. This is likely to impact positively on the market as inflation slows down in July ahead of the CBN policy meeting in September where there is a possibility of leaving MPR unchanged to watch trend, especially as the rate hike cycle is being closed in mature economies. This will further boost the ongoing sector rotation and portfolio realignment on the exchange, considering the oversold state of the market and some stocks. However, players should understand volatility and technical tools that will help profit from the current market trend.
Mixed momentum and sentiments continued to reflect in the market dynamics of volatility that creates the needed opportunity to buy low and sell high, especially as most of the listed companies have become undervalued owing to the recent downtrend in their share prices, even as the pullbacks are driven by high cap stocks that are facing selloffs due to sector rotations and portfolio rebalancing. This pullback below the 96,000 psychological line, T-line and 50-Day Moving Averages confirms the weakness of momentum and the distribution phase of the market.
Position taking across some major sectors of the market also weighed in on the NGX, creating opportunities for market players to pick value stocks at discounted prices.
This is especially true now that corporate numbers reveal the position of many companies on the exchange, despite the ongoing economic headwinds as revealed by economic data. The selling sentiment and pullback are a different phase of market that requires change in strategies to navigate and follow the trend. It is expected that smart money will take advantage of the oversold state in the market to buy into value and defensive stocks to support rebound any moment from now.
The NGX index’s action remains below the T-line and the two moving averages of 50-EMA and 50-SMA indicate weakness in the midst of changing market fundamentals and technicals. We note that the economic reforms of the government, measured by the outpouring of fiscal and monetary policies are yet to put the nation’s economy on the path of recovery, due to the continued mismatch of these and previous ones. There are also issues with the implementation style amid the oscillating oil production output even as the Naira continues to depreciate at a time that oil is rebounding to sell below $80 per barrel at the international market.
At midweek, Airtel Africa continues to notify the investing public of its ongoing share buyback programme, while Ucap. Linkage Assurance and The Initiates informed the exchange of insider dealings in its shares. In the midst of all these, it is safe for investors to target companies with consistent track records of dividend payment, strong fundamentals and growth prospects that will support further growth in earnings which price feeds on in any market cycle.
Technically, the NGX is still weak but trying rebound in the face of selling sentiments as revealed by the candlestick formation and momentum indicators at the end of day trading. The ADX is looking up at 29.27, while RSI and Money Flow Index were mixed to read 29.32 and 35.83 points against the previous session 29.68 and 29.42 points respectively. Market players should watch this current trend and trade with caution in the face of funds returning to the market, despite profit taking in some sectors. Also, trading volume pattern continued to oscillates, suggesting buying interest and selloffs in some sectors in the midst of players digesting economic data.
To navigate the rest of this quarter and beyond 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 prices slip at midweek to continue its oscillation as it trades at $76.83 per barrel in the midst of global demand fear, expectation of rate cut by Fed and ceasefire talk in the Middle East conflict entered another stage. As rising geopolitical uncertainties across many economies is a threat to the global economy. This trend may likely continue for the rest of 2024, while the up and down movement continues to drive volatility, even as the raging war between Ukraine and Russia continues to influence global oil supply and demand.
Meanwhile, trading at midweek opened in the upside before pulling back to oscillate for the rest of the session on selling pressure in blue chip companies and position taking in others, a situation that pushed the NGX’s index to an intra-day low of 95,823.35bps from its highs of 95,935.04bps, before closing slightly below its opening level at 95,832.29bps.
Market technicals for the session were mixed and weak with lower volume when compared to the previous session in the midst of breadth favoring the bulls on a selling sentiment as revealed by Investdata’s Sentiments Report showing 8% buy position and 92% sell volume. The total transaction volume index stood at 0.68 points, just as energy behind the day’s performance was relatively weak as Money Flow Index was up to read 35.83pts, from the previous day’s 29.42pts, indicating that funds entered the market, despite sliding down.
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Index and Market Caps
The key NGXASI at the end of day trading lost 63.63 basis points, closing at 95,832.29bps after opening at 95,895.92bps, representing a 0.07% drop. Market capitalization, on the other hand, rose by N599bn, closing at N55.05tr from the previous day’s N54.45tr, representing a 1.12% value gain as a result of the supplementary listing of 161.17bn shares in favour of International Breweries.
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The downturn was driven by profit taking and selloff in Nascon, UACN, Oando, UBA, FBNH, GTCO, Mansard, May/Baker and Aiico among others. This impacted mildly on Year-To-Date growth inched down to 28.16%. Market capitalization YTD gain up to N10.82tr, representing 33.98% above its opening level for the year.
Bearish Sector Indices
Sectoral performance indexes were in red, except for NGX Industrial goods Index that closed marginally up by 0.06%, while the NGX Banking led the decliners after losing 0.30%, followed by Insurance, Energy and Consumer goods with 0.18%, 0.08% and 0.02% respectively.
Market breadth turned positive as gainers outnumbered losers in the ratio of 26:18, while activities in volume and value were down after investors exchanged 360.56 million shares worth N7.25bn. Volume was driven by trades in Oando, GTCO, Cutix, Universal Insurance and FCMB.
Ikeja Hotel and RT Briscoe were the best performing stocks, gaining 10% and 9.76% respectively, closing at N7.70 and N2.25 per share respectively on the back of market forces and sentiment respectively. On the flip side, University Press and Oando lost 9.40% and 8.66% respectively, closing at N2.41 and N39.55 per share, purely on selloffs and profit taking.
Market Outlook
We expect mixed sentiment to continue on reaction to yield drop in fixed income market, bargain hunting, profit taking and sector rotation amidst oversold region. Portfolios repositioning is however continuing, as investors take advantage of pullbacks to buy into value.
This is amid the volatility and pullbacks that add more strength to upside potential. Consequently, 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
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
08028164085
