Positive Sentiment Continue On Profit Taking, Amid Positioning Ahead Of More Q3 Earnings Inflow

Market Update for October 24

The uptrend and bullish sentiment on the Nigerian Exchange continued Thursday, ahead of the last trading day of the week on increased buying interests across the major sectors of the market. This pushed the composite NGX All-Share index higher on an above average traded volume in the midst positive market breadth and rekindling confidence as corporate numbers released so far beat expectations, thereby extending the positive outing  for a fourth consecutive session breaking out the 99,000 psychological line. Also, more companies are expected to present their earnings reports on Friday and next week in line with statutory deadline of the NGX.

Airtel Africa, CAP, UPDC, Guinness Nigeria and Ikeja Hotel made available their quarterly earnings reports during the session, showing mixed numbers as reflected in their top and bottom lines. Numbers from CAP, UPDC and others were outstanding, giving insights as to what investors should expect at the end of the current financial year.

The NGX index’s action formed a top reversal chart pattern that signaled continuation of trend, which needs confirmation amid the continued high volatility and uncertainty due to the prevailing high interest rates and yields in the fixed income market instruments.

These scorecards are revealing the impact of capacity in the various companies and the ability to grow market share of their various industries, a situation that supported their numbers and reflected in the top and bottom lines. Similarly, we cannot underestimate the capacity of earnings news and other factors that drive strength or weakness of any market are the different dynamics of stock markets technically which require effective strategies to navigate and follow trends profitably.

At the current markup phase on the NGX, discerning investors and smart traders are repositioning their portfolios along sectors and companies with potentials to release positive numbers on the strength of their earnings power ahead of their September quarterly earnings reports. Also, seasonal trends are likely to repeat themselves in this last quarter of the year which comes with seasonality and sentiment that makes it very important to market players across the globe. This is especially as retracement from strong support level of 96,568.52 basis points and 96,684.90bps after forming a bottoming tail and uptrend candles. This created the perfect setup for high probability swing trade to catch on ahead of financial news that will impact prices.

The NGX index’s action is still trading above the T-line and two moving averages of 50-EMA and 50-SMA, this indicate buying sentiment 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. 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 trading above $75 per barrel at the international market.

Technically, the NGX is on uptrend in the midst of positive momentum and improving transacted volume that signaled position taking, as the market is expecting corporate numbers to give a clear direction. Also, candlestick formation and momentum indicators had revealed somewhat returning of strength to the market. As ADX is looking down at 15.29, while RSI and Money Flow Index were up to read 63.92 and 63.50 points against the previous session 61.68 and 57.06 points respectively.

Market players should watch this current trend and trade wisely in the face of funds entering the market on buying sentiment in some sectors and profit taking in others. Also, trading volume pattern continued to oscillates, suggesting buying interest and selloffs in the market amid players looking forward to more earnings reports and policy direction of economic managers.

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 on Thursday pulled back to continue its oscillation, trading at $74.32 per barrel in the midst of increased  US inventory  and lingering  conflict in the Middle East with exchange of heavy fire between Israel and Hezbollah worrying the  markets about supply. Also, demand outlook in the midst of rate cuts by the major central banks of the world. The rising geopolitical uncertainties across many economies remains a threat to the global economy and energy consumption. 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, Thursday’s trading started in the dowside amid initial selloffs that hit some other stocks, before rebounding during the session, oscillating on the strength of positioning in blue chip companies and others. This situation pushed the NGX’s index to an intra-day high of 99,217.96bps from its lows of 98,528.96bps, before closing above its opening level at 99,189.95bps.

Market technicals were positive and strong with higher volume when compared to the previous session in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 96% buy position and 4% sell volume. The total transaction volume index stood at 0.93 points, just as momentum behind the day’s performance was  strong as Money Flow Index inched up to read 63.50pts, from the previous day’s 57.06pts, indicating that funds entered the market.

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Index and Market Caps

At the end of Thursday’s trading, the benchmark NGX All-Share Index gained 245.53bps closing at 99,189.95 basis points after opening at 98,944.42bps, representing a 0.25% growth. Market capitalization rose by N148.77bn, closing at N60.10tr from the previous day’s N59.96tr, representing a 0.25% appreciation in  value.

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The upturn was driven by positioning in the shares of Accesscorp, Unilever Nigeria, UBA, FBNH, Zenith Bank, Wapco, Cornerstone and Japaul Gold among others. This impact positively on Year-To-Date gain which increased to 32.65%, while Market capitalization was up to N16.04tr, representing 47.02% above its opening level for the year.

Bullish Sector Indices

Sectoral performance indexes were mixed, as NGX Consumers goods and Insurance index closed lower by 0.77% and 0.68% respectively, while the NGX Banking led advancers after gaining 2.61%, followed by Energy and Industrial goods with 0.04% and 0.03% respectively.

Market breadth was positive, as gainers outnumbered losers in the ratio of 28:19, while transactions in volume and value were up after investors exchanged 400.91 million shares worth N15.72 bn. Volume was driven by trades in UBA, Japaul Gold, Custodian Investment, Accesscorp and Zenith Bank.

Accesscorp and Academy Press were the best performing stocks, gaining 9.95% and 9.79% respectively, closing at N22.10 and N3.14 per share respectively on the back of sentiment and earnings expectation respectively. On the flip side, Royal Exchange Assurance and International Breweries lost 9.72% and 6.24% respectively, closing at N0.65 and N4.06per share, purely on selloffs and profit taking.

Market Outlook

We expect positive sentiment and mixed trend to continue on profit taking and  positioning, ahead of more Q3 earnings reports. Also, sector rotation and portfolio rebalancing continues in the market, with investors taking 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