Positive Sentiments Yet On NGX, But Cautious Trading Persist, As Investors Digest March Year-end Accounts
Market Update for July 9
Upbeat trading and bull run continued Wednesday on the Nigerian Exchange as demand for low, mid and high cap stocks persisted, with the market making new all-time high on a daily basis, thus reflecting investor confidence and continued flow of funds into the equity space. The composite NGX All-Share index broke out the 121,653.90 basis points level, testing 122,055.70bps before settling at 121,989.70bps on a high traded volume and expanded positive market internals and buying sentiment. Also, the numbers of companies whose share prices hit new 52-week highs increased, just as sectorial indexes breaking out new highs, all of which impacted the market positively.
It is noteworthy that as the market continues to breakout various resistance levels and psychological lines, understanding the power of index or price action and candlestick pattern in every context can make the difference between a profitable trade, or loss. As such, paying attention to market sentiment and reading charts with clarity is very important at this critical point of the market and ahead of many factors that could impact positively or otherwise.
The relatively low rates at the end of midweek’s the Nigerian Treasury Bills’ primary market auction signal a systematic move to reduce cost of funds in the economy, and consequently the already high cost of managing government’s debts. This could also slowing down economic activities expected to drive the nation’s GDP at all times, even as all eyes are on the consumer price index report for the month of May, as well as quarterly corporate earnings reports that would offer insights and guide investment decisions.
The NGX is at a cross road of pullback on profit taking, or continued uptrend depending on market forces. Already, the market is in its overbought region with strong momentum that calls for cautious trading and profit taking while companies continue to notify the exchange of the board meetings to approve their Q2 earnings reports. These are in addition to the all-important Central Bank of Nigeria (CBN) policy meeting slated for July 20 and 21.
The ongoing recovery on the NGX is creating opportunities for new entry and bargain hunting, as the market consolidates, especially if the expected corporate numbers beat investors’ expectations and Monetary Policy Rate remains unchanged at the forthcoming policy meeting of the CBN.
The relatively high volume of trades reveal institutional participation in the market with stock prices rallying in the midst of strong positive market internals, while investors are taking advantage of any pullback to buy into value ahead of earnings inflow. There is also the impact of market confidence around the government’s economic reforms, while foreign investors are also seeing value in the NGX, a situation that has supported inflow of funds into the market and the economy at large. Nevertheless, the expected mixed trend in Q3 may not halt the bull trend if corporate earnings beat expectation. Already, the slowdown in fixed income market rates has triggered money flowing into the market.
All eyes are on U.S President Donald Trump’s tariffs deadline and letters to trade partners, as events continue unfolding in the midst of geopolitical tensions, global uncertainties due to the Middle East ceasefire moves for peace talk, which had impacted mixed sentiment on the major stock markets of the world. Nonetheless, there is need to avoid panic selling, even as profit booking could arise. 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 persisting.
Technically, money flow and other momentum tools were up indicating that funds are entering the market on position taking that presents opportunities to buy low and sell high in the midst ongoing volatility and overbought state of NGX. The index inched higher on a buying interest, thereby creating the perfect setup for high probability of continuation to catch better-than-expected corporate earnings to reposition at the right price. Also, the index action trading above T-line and the two moving averages of 50-EMA and 50-SMA which reveals strength in the midst of changing market sentiment and technicals on the NGX. But RSI continued to signal overbought market as it reads 82.29, which also called for cautious trading and know when to cash out profit even when taking positions.
Market pulse as revealed by the candlestick formation and momentum indicators shows that the ADX is very strong to read 68.01points, while RSI and Money Flow Index were up at 82.29 and 70.89 points against the previous session’s 81.48 and 70.83 points respectively. NGX at this point call for players to be watchful and trade wisely in the midst of markup phase and buying sentiment in some sectors and profit taking in others on a daily time frame. Also, trading volume pattern continues to oscillate, suggesting smart money are present 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 global economic outlook in the face of uncertainties and geopolitical tensions.
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 $70.10 per barrel, in the midst of uncertainty and concerns over tariffs deadline. Also, the ceasefire in Mideast for peace talks that continues to hold, and Ukraine-Russia war. Even as OPEC production hike misguide the market. The ongoing developments will deflate inflation and rate hikes if peace is achieved. All eyes are on oil cartel meeting this weekend. 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.
Midweek trading opened slightly in the red but rebounded powerfully at midday which it was sustained for the rest of the session, despite oscillating position taking and profit booking in some stocks. This situation pushed the NGX’s index to intra-day high of 122,055.67bps from its lows of 121,414.50bps, before closing above its opening level at 121,989.70bps.
Market technicals were strong and positive with lower volume when compared to previous session in the midst of breadth that favors the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 90% buy position and 10% sell volume. The total transaction volume index stood at 1.12points, as impetus behind the day’s performance was strong, as Money Flow Index was inched higher to read 70.89pts, from the previous day’s 70.83pts, indicating that funds entered the market.
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Index and Market Caps
The NGX All-Share Index gained 289.27bps, closing at 121,989.67bps from 121,653.9bps, representing a 0.28% growth, while market capitalization rose by N212.43bn to close at N76.97tr from the previous day’s N76.76tr, representing a 0.28% value gain.
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Meanwhile, the upturn was driven by accumulation and buying interest in the shares of Ellah Lakes, Japaul Gold, PZ, Wapco, Zenith Bank, Accesscorp,NB, NGXGroup and VFDGroup among others, which impacted positively on Year-To-Date gain which inched higher to 18.52% while Market capitalization gain stood at N23.12tr, representing 22.64% increase over its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed after the NGX Consumer Goods and Energy closed 0.13% and 0.05% lower respectively, while the NGX Insurance index led advancers, gaining 2.48%, followed by Industrial goods and Banking with 0.97% and 0.45% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 57:17, while activities in volume and value were up, after investors exchanged 886.70 million shares worth N16.61bn, with volume driven by trades in Japaul Gold, Accesscorp, Aiico, Universal Insurance and Ellah Lakes.
C & I Leasing and Redstar Express were the best performing stocks, gaining 10% each, closing at N7.26 and N11.11 per share respectively on the back of sentiment and market forces. On the flip side, Legend Internet and Guin Insurance lost 8.05% and 7.14% respectively, closing at N8.00 and N1.04per share, purely on profit taking and selloffs.
Market Outlook
We expect positive sentiments on bargain hunting and sector rotation in the midst of profit booking, as traders trade with caution, while investors digest March year-end accounts and dividend payout and buying into value in the midst of portfolio reshuffling, even as few audited accounts are expected to hit the market with dividend announcement.
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
