Market Update for October 23

Bullish momentum continued Wednesday on the Nigerian Exchange. The session witnessed mixed trend as buyers and sellers competed for dominion, a situation that impacted the benchmark NGX All-Share index marginally and it closed higher on a low traded volume and positive market internals. This extended the bull transition for the third straight trading day while market players reacted to the impressive numbers released so far, while expecting more companies to make available their earnings reports.

Africa Prudential and Nigerian Breweries made available their Q3 earnings reports during the session, showing mixed numbers as reflected in their top and bottom lines. The NGX index’s action formed a bearish hammer, which is a reversal chart pattern that signaled a breakout or fake-out of trend that needs confirmation as trading opens on Thursday. With more earnings reports expected to hit the market in the coming days amid the continued high volatility and uncertainty due to the prevailing high interest rates and yields in the fixed income market instruments.

Playing the earnings season may be difficult for many investors and traders, but the Relative Strength Index (RSI) a real technical tool that had been tried and tested in identifying oversold stocks that are set for a rebound. So, it is time to combine resistance and support levels to catch the value areas of stocks with low RSI values that suggest bullish reversal underway. Meanwhile, any pullback in the midst of NGX  recovery, portfolio rebalancing and sector rotation which have created opportunities for buying into value at a time some sectors and industries performance are being influenced by policies of the government and various industry regulators.

There are also the effects of capacity building to capture more market share among these companies, a situation that supported their numbers and reflected in their top and bottom lines in the previous quarters. 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 trades 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 still on uptrend in the midst of positive momentum and low transacted volume that signaled wait and see, as the market is expecting corporate numbers to give a clear direction. Just as candlestick formation and momentum indicators had revealed somewhat returning of strength to the market. As ADX is looking down at 15.44, while RSI and Money Flow Index were up to read 61.68 and 57.06 points against the previous session 61.21 and 49.82 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 at midweek slide marginally to continue its oscillation, trading at $75.40 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.

Midweek’s trading opened in the green and it was sustained for the rest of the session, despite oscillating on selloffs in highly capitalized stocks and buying interest in others. This situation pushed the NGX’s index to an intra-day high of 99,014.85bps from its lows of 98,556.21bps, before closing above its opening level at 98,944.42bps.

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 85% buy position and 15% sell volume. The total transaction volume index stood at 0.64 points, just as momentum behind the day’s performance was relatively strong as Money Flow Index inched up to read 57.06pts, from the previous day’s 49.82pts, indicating that funds entered the market.

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Index and Market Caps

Trading ended with the composite NGX All-Share Index inching up by 51.84bps closing at 98,944.42 basis points after opening at 98,892.58bps, representing a 0.05% up. Market capitalization rose by N31bn, closing at N59.96tr from the previous day’s N59.92tr, representing a 0.05% value gain.

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 oversold range has increased as market correction and volatility call for intelligent  trading and positive chart patterns to be on our watchlist. These stocks have potentials to retrace, considering their earnings prospects and the oscillating moves in an upmarket and weak economy.

To become a member, send ‘YES’ or ‘STOCKS’ to the phone numbers below. Take advantage of this service to buy right and sell right at the current oscillating market in the midst of earnings season, portfolio reshuffling, and repositioning as we await an economic reform policy that can stimulate and re-track the economy to the path of growth and development.

The upturn was driven by position taking in the shares of Unilever, Oando, UBA, FBNH, Zenith Bank, Wapco, Dangote Sugar and CWG among others. This impact mildly on Year-To-Date gain which increased to 32.33%, while Market capitalization was up to N15.87tr, representing 46.57% above its opening level for the year.

Mixed Sector Indices

Sectoral performance indexes were mixed as NGX Insurance index closed lower by 0.42%, while the NGX Banking led advancers after gaining 2.41%, followed by Consumer and Industrial goods with 0.31% and 0.05% respectively. Just as NGX Oil/Gas finished flat.

Market breadth was positive, as gainers outnumbered losers in the ratio of 31:16, while transactions in volume and value were down after investors exchanged 283.74 million shares worth N8.29 bn. Volume was driven by trades in UBA, NB, Accesscorp, Oando and Zenith Bank.

Oando and Unilever were the best performing stocks, gaining 10% each, closing at N89.65 and N20.90 per share respectively on the back of sentiment and impressive earnings respectively. On the flip side, Aradel Holdings and NNFM lost 9.99% and 9.93% respectively, closing at N562.90 and N34.00per share, purely on selloffs and profit taking.

Market Outlook

We expect positive sentiment and mixed trend to continue on positioning and reaction to impressive numbers, 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