Nigerian Equities Under Sell Pressure Amid Profit Taking, Inflow Of Economic Data, Corporate Earnings
Market Update for August 20
The bearish transition on the Nigerian Exchange continued at the midweek, as selloffs and profit taking dominated trades which weighed on the benchmark NGX All-Share index, breaking down the 142,000 psychological line on a low traded volume and negative market internals in the midst of selling pressure across the major sectors of the market. This was revealed by money flow index, as funds fled from momentum and value stocks amid the uptick of rates in the fixed income market as indicated in the just Treasury Bills’ primary market auction of 91 and 364-day tenor rates inched to 15.35% and 17.44% respectively, while the 182-day remained unchanged at 15.5%.
Meanwhile, some stocks made a new high, breaking out their 52-week highs to reflect buying interest in companies like Etranzact, Guinea Insurance, Champion and few others, while selloffs at this current phase of decline and weakness on the NGX after the index’s action had broken down the T-line, This calls for cautious trading in the face of smart money profit taking and digesting the recent quarterly earnings reports of quoted companies. The weak momentum in the market is expected after a long rally or uptrend which is the beauty of stock markets anywhere in the world. Money flow at the end of the session broke down the 50 points to read 49.85points which indicates selling sentiment and profit taking ongoing.
The mixed sentiment continued at the global market as all eyes on development in the search for peace deal in Ukraine, expecting oil prices to fall once a peace deal is reached. Knowing that possibility of more sanctions or tariffs on Russian oil buyers, if all these efforts to secure peace in Ukraine fails in the midst of geopolitical tension in Middle East conflicts and global economic recovery. Also, all eyes are on Trump planning to meet with Ukraine and Russia Presidents together for peace talk, even as major stock markets of the world have oscillated as a result Trump leadership pattern and policy statements here and there.
As such, let your trading plan and investment objective guide your entry and exit. It is noteworthy that the improvement in macroeconomic data points to where the domestic economy is heading. This is the time to pay close attention to momentum, price action and market structure while timing your trades and avoiding losing money with your stop loss. While navigating the market and targeting value on the strength of companies’ performance and prospect, focus on growth and defensive stocks with strong earnings power and positive technicals in the face of sector rotation and pullbacks persisting.
Technically, money flow and other momentum tools were down, indicating that funds flying away from the market, despite the pullbacks and correction that presents opportunities to buy low and sell high in the midst ongoing volatility and decline phase of the market. The index inched lower on a selling sentiment, thereby creating the perfect setup for high probability of continuation to catch good entering position at the right price. Also, the index action trading below T-line and heading to two moving averages of 50-EMA and 50-SMA which reveals further weakness in the midst of changing market sentiment and technicals on the NGX.
Investors sentiment as revealed by the candlestick formation and momentum indicators shows that ADX is looking down to read 80.72points, while RSI and Money Flow Index were down at 63.75 and 49.85points against the previous session’s 69.25 and 54.15 points respectively. NGX at this point call for players to be watchful and trade wisely in the midst of decline phase and selling sentiment across some major sectors and indexes on a daily time frame. Also, trading volume pattern continues to oscillate, suggesting institutional participation is slowing down in the market amid revaluation of the market and short-term opportunities, looking at economic events in the face of policy direction of the government and its economic managers.
To navigate the rest of Q3 and beyond profitably, it is important to run with economic events, fundamental and technical analysis, join investdata live sessions at noon every Monday, Wednesday and Friday’s trading session “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 pullbacks. Despite the oscillating volume of transaction witnessed in recent time, it is time to position in undervalued stocks, sectors and the next insider playing opportunity.
Oil prices at midweek inched up to continued its oscillation, trading at $66.14 per barrel, in the midst of drop in US inventories and focus on Ukraine peace push. Even as geopolitical uncertainties persists on a global supply headwinds. Even as OPEC production hike misguide the market. The ongoing developments will trigger inflation and rate hikes if peace is achieved. Tariffs and geopolitical tensions are already driving mixed macroeconomic data emanating from the U.S and China which remain a concern for investors. Just as uncertainties across many economies remain a major source of concern to the global economy and energy consumption in 2025. This trend may likely continue, while the up and down movement continues to drive volatility.
Trading opened slightly in the downside and it was sustained for the rest of the session, despite the seeming positioning in some stocks, as profit taking hits many companies. This situation pushed the index to its intra-day low of 141,566.30bps from its highs of 142,813.30bps, before closing below its opening level at 141,567.00bps.
Market technicals were weak and negative with lower volume when compared to previous session in the midst of breadth that favors the bears on a selling pressure as revealed by Investdata’s Sentiments Report showing 0% buy position and 100% sell volume. The total transaction volume index stood at 0.58points, as energy behind the day’s performance was relatively weak, as Money Flow Index was down to read 49.85pts, from the previous day’s 54.15pts, indicating that funds left the market.
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Index and Market Caps
The NGXASI, at the end of trading session shed 745.17bps, closing at 141,566.30bps from 142,613.47bps, representing a 0.73% decline, while market capitalization fell by N662.5bn to close at N89.56tr from the previous day’s N90.23tr, representing a 0.73% depreciation in value.
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Meanwhile, this session downturn was driven by profit taking and selloffs in the shares of GTCO, NB, Guinness, Conoil, Ellah Lakes, UPDC, Presco and Conhall among others, which impacted negatively on Year-To-Date gain which inched lower to 37.54% while Market capitalization gain stood at N38.78tr, representing 42% increase over its opening level for the year.
Bearish Sector Indices
Sectoral performance indexes were in red, save for NGX Oil and Gas that closed higher with 0.11%, while NGX Insurance index led the decliners after losing 7.20%, followed by Consumer goods, Banking and Industrial goods with 1.9%, 1.22% and 0.01% respectively.
Market breadth was negative as losers outnumbered gainers in the ratio of 15:50, while activities in volume and value were down, after investors exchanged 721.82 million shares worth N12.94bn, with volume driven by trades in Champion, Universal Insurance, Royal Exchange, Regency Assurance and Aiico.
Austin LAZ and Champion were the best performing stocks, gaining 10% and 9.97%, closing at N2.64 and N19.74per share respectively on the back of sentiment and market forces. On the flip side, Guiness and Conoil lost 9.98% and 9.98% respectively, closing at N140.20 and N211.10per share, purely on profit booking.
Market Outlook
We expect selling sentiments to continue on profit taking in the midst of sector rotation and bargain hunting. As players digest economic and corporate numbers in the face of portfolio rebalancing and cautious trading, while investors buy into value in the midst of portfolio reshuffling, even as few quarterly reports are expected to hit the market.
Also, sector rotation and portfolio rebalancing continued in the market with investors taking advantage of price correction 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
ambrose.o@investdataonline.com
Tel: 08028164085, 08179547605
