Market Update for December 21
The bullish nature of stocks continued Thursday on the Nigerian Exchange as the Santa Claus rally persisted amidst high demand for financial services stocks and blue chip companies, just as highly priced equities continued to weigh positively on the benchmark NGX All-Share index on a very high traded volume and positive market breadth. This confirmed the markup phase and bull-run, in the midst of seasonality and ongoing portfolio rebalancing ahead of the 2024 earnings reporting and dividend season. Similarly, market fundamentals and liquidity levels have continued to change.
At the current phase of the market, the very important things market players should watch out for are volume pattern, direction of flow using money flow index, the ratio of advancers to decliners line, and resistance zone as a result of profit taking. These are vitally important to you as a technical trader. When the market closes, there is never a guarantee it will open higher or lower the next session. So, you must watch the directional trade pattern to stay at float with the market to know when to take profit which is the beauty of trading and investing.
The historic crosses and moves continued on the NGX as the market hit another new all-time high of 74,289.02 basis points after breaking out the 74,000 psychological line to reveal the impact of price appreciation of large cap stocks, positive sentiments and buyers’ conviction in the midst of weak macroeconomic indices and increasing headwinds. Equity prices are, however, moving in proportion to the rising inflation and depreciation in the value of the Naira to make the stock market attractive. faDespite these challenges and opportunities that come with the global and domestic financial market reset in the face of rising geopolitical tension, as well as ongoing reforms of the government by way of fiscal and monetary policies.
The bull ascendence for the year and four straight sessions from the first day of week ahead of the Christmas holidays calls for caution, due to the expected profit taking. Buying sentiment increased on Thursday to reflect more position taking across some major sectors of the market, as bargain hunting for blue chip stocks for dividend income and capital gain continue. As mixed outlook in the fixed income market and negative real returns in the face of rising inflation has made equity space attractive and funds flowing in that direction at the close of the day trading. This revealed the presence of smart money as volume is looking again ahead of year-end.
The NGX index action extended its rally to trade above 74,000 mark and T-line, to signal a markup phase on a buying sentiment and positive money flow indices that revealed funds entering the market. At this point, let your technical analysis continued to guide you at all time. Market players are expected to take advantage of any moves in the market to create more wealth by taking the right decision at the right time. Locking in gains on a portion of a trade is a fantastic way to enjoy trading. Despite, the current disconnection of the stock market from economic reality of the country, which remains a concern for investing public.
Trade metrics at the end of the session supported the uptrend as NGX and momentum indicators like MACD are moving in the same direction to indicate bull divergence on a very high traded volume and buying pressure. Meanwhile the dividend paying period in the market draws even closer. A glimpse into what we should expect at year-end has been provided by the unaudited Q3 corporate earnings reports released by listed companies.
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Oil price oscillation continued at the international market retrace to trade at $80.23 per barrel in the midst of Angola announcing its withdrawer from OPEC and attacks on ships on the Red sea. Even as the Middle East conflict is taking another dimension amid calls for another ceasefire, while the three major central banks left rates unchanged due to cooling inflation and outlook of rates cut in 2024. The influence of demand and supply oil are worsened by the geopolitical tensions rising across the globe at a time the Russia-Ukraine war gradually approaches its third year. The war remains a major cause for concern with much more at stake than previously thought. The supply tightening due to the Russia-Ukraine war will propel the up and down movement in oil price, which also drive market volatility across the globe.
Thursday’s trading started on the upside and was sustained for the rest of the session on buying interests in banking stocks, large cap and blue-chips companies. This situation pushed the Index to an intraday high of 74,292.82bps from its lows of 73,397.71 points, before closing sharply above its opening level at 74,289.02bps.
Market technicals were positive and strong with a higher volume traded, when compared to the previous session, in the midst of breadth favoring the bulls on a buying pressure as revealed by Investdata’s Sentiments Report showing 100% buy position and 0% sell volume. The total transaction volume index stood at 1.64 points, just as the momentum behind the day’s performance was strong, with Money Flow Index looking up to read 74.68pts, from the previous day’s 72.87pts, indicating that funds entered the market.
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Index and Market Caps
The NGX All-Share Index at the close of Thursday with a 891.31bps gain, closing at 74,289.02bps, from the opening of 73,397.71bps which represented 1.21% growth. Market capitalization rose by N487.74bn, closing at N40.65tr, from the previous day’s N40.16tr, which also represented a 1.21% value gain.
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Meanwhile, the upturn was driven by buying interests in the shares of MTNN, Okomu Oil, UBA, Accesscorp, Transcorp, Flourmill,FBNH, Zenith Bank, Wapco and Infinity Trust Mortgage Bank, among others. This impacted positively on Year-To-Date gain, that increased to 44.95%, while Market Capitalization YTD gain stood at N11.76tr, representing a 45.54% rise above its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed as the NGX Consumer Goods and Energy closed 0.15% and 0.05% lower respectively, while the NGX Banking led the advancers after gaining 1.41%, followed by Insurance and Industrial goods with 0.61% and 0.01% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 50:19, while activities in volume and value terms were up, after players exchanged 760.93m shares worth N13.03bn, driven by trades in Abbey Building, Accesscorp, Transcorp, UBA and GTCO.
Transcorp and IMG were the best performing stocks, gaining 10% each and closing at N8.47 per and N9.30 share respectively, on market sentiment and forces. On the flip side, John Holt and Ellah lakes lost 10% and 9.94%, closing at N2.34 and N2.90 per share, purely on the back of profit taking and selloffs.
Market Outlook
We expect positive sentiments and profit taking to continue on bargain hunting for dividend paying stocks ahead of Christmas holidays in the midst of sector rotation and portfolio rebalancing on the strength of the better-than-expected corporate numbers released and high yields. However, we note that 2024 is beginning dividend season ahead.
Meanwhile, all eyes are on the fiscal and monetary authorities to give direction of the government reforms and policies so far.
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