NSE Sectorial Indexes Remain Above 50 DMA Ahead of Full-Year earnings Season

Graph: NSEASI Weekly Time Frame

Nigeria’s equity market over the past week closed lower on extended global markets shakeout panic, despite strong economic recovery and impressive Q3 numbers from companies in the consumer goods sector, besides the 57.3 points January Purchasing Managers’ Index (PMI) report, making 10 months of positive data.
Last week’s free fall of equity prices halted the previous week’s up market, the first of its kind in the New Year, resulting from a massive profit taking and panic selling.
The increased selling pressure and low demand for stocks in the period under review, which was the first full trading week in the second month of the year is likely to reverse in the uptrend direction, if history repeats itself as the full year earnings season earnestly kicks off with early fillers this week. The Q3 numbers for March accounts released last week has given insights into what should be expected from companies in that sector with December year end accounts.
International stock markets around the world were lower over the past week, especially the U.S markets that entered into a long awaited correction wave as its Q4 GDP data was revised to negative, rising rate and labour hour earnings. Also, the impact of the tax reform is likely to fuel inflation in the midst of already high valuations in its equity market. Emerging and Frontier markets have become the toast of hedge funds and other foreign funds as most of the equities in these markets remain relatively undervalued due to the early impact of low oil price.
A broad-based uptrend lifted equities’ capitalisation classes in January, providing a healthy market rally that kicked off February on a positive note as smart money positioned for expected full year financials that fueled the increasing demand for stocks. There is the possibility of the index zooming past the 45,000 psychological line and continuing to build strength on expected stronger Q4 through the first quarter.
Banking stocks suffered losses during the period under review to create buying opportunity as expected earnings reporting season to be a highly supportive environment if the numbers beat expectations, given that the possibility of retracement at this point is high. Careful stock picking will be required in different sectors, despite the seeming favorable market conditions during the earnings reporting season.

NSE Banking Index

NSE Banking index over the past week moved lower by 3.41% after trying to retrace up in the previous week to its five-year high and remain within the bullish channel. A breakout of the upper line of the rising channel will confirm a new trend. The possibility of reversal to the up direction is high before and during the earnings season but with the increasing buying of new position last Friday. The second tier banking stocks for the period had significant pulled back over the first tier banks due to profit taking from the recent rally of low price banking stock.

NSE Insurance Index

NSE Insurance Index lost 0.73% over the past week to pullback from the recent retracement that was attributed to profit booking that had created opportunity for new entrants ahead of full year earnings season. This sector’s index had been trending down for over four years before the breakout in April 2017, but in oscillation mode in recent weeks

NSE Consumer Goods Index

The NSE Consumer Goods Index moved lower by 2.60% over the past week to a strong support of breaking down 992.80 point, which is expected to create buy opportunities as recently released Q3 numbers from the sector revealed value and strength with the index trading above the 50-Day moving average. Added to this is the fact that most stocks in the sector are dividend paying with increase in dividend yield as price drop..

NSE Industrial Goods Index

The NSE Industrial goods Index moved lower by 3.52% over the past week as high cap stocks in the sector depreciated in value due to panic selling that hit the market. The recent pullback brought the index to 2015 position after breaking out of the resistance level at 2401, with the expected rebound on the strength of expected financials which may usher in a new uptrend rally. The sector is trading above 20 and 50-Day moving average.

NSE Oil/Gas Index

NSE Oil/Gas index over the past week shed 1.27% after a sideways movement, waiting for reversal since the rising oil prices did not impact the sector’s performance positively.

NSE Pension Index

The recent pullback of the pension index, makes dividend paying stocks in the Nigerian stock market cheap and attractive for income investors, knowing that this index comprise blue-chips and growing stocks that are consistent in dividend payment. With earnings reporting season just around the corner, investors should build tents around value-laden stocks with high possibility of growing dividend payments for the 2017 financial year, when the results start pouring in.

The Bottom line
It is time to combine fundamentals and technical tools to take decision by knowing the support and resistant levels to take or exit any position. The market is in phases. Therefore, know the cycles in order to manage your trading and investing risk. For stocks that should be on your shopping list to buy in this seasonality changes as the year winds down, sign up to INVESTDATA BUY AND SELL signal setup by calling 08028164085.
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Tel: 08028164085, 08032055467