Market Update for September 5
The bear-run continued on the Nigerian Exchange Thursday amid selling sentiment in some major sectors of the market as investors and traders sustained profit taking in expectation of more interim dividend paying banks results flowing in. The market also interpreting recent macroeconomic data on the back of the ongoing policy summersault by government with negative impacts on Nigerians and the business environment. The benchmark NGX All-Share Index closed lower, thereby extending the bear transition for the second consecutive session on a low traded volume, amid a negative market breadth.
These pullbacks are expected after an uptrend which is part of market dynamics in any market across the world, just as historical data had revealed, this month to be a very dicey one with high volatility and mixed trends that creates buy opportunities for market players who understand the big picture of equity investment and its dynamics in any condition that may arise. The month has so far recorded a down market in 15 years, and closed green 11 times in 26 years. It is a known fact that investing strategies in any market work with seasonality and timing to deliver value for discerning investors and smart traders.
Transforming risk into rewards comes with understanding what you are doing, not what you are thinking, because market’s dynamics at any cycle provides opportunity to buy low and sell high, especially as most listed companies have become undervalued owing to the recent oscillations of uptrend and pullbacks in their share prices. The market retraced back to test the T-line, but below the 50-Day Moving Average confirms the mixed momentum at distribution phase of the market.
The markdown phase of the market impacted the NGX index’s action, with players picking value stocks at discounted prices in expectation of more banks’ interim dividend and earnings. This is especially true now that corporate numbers reveal the position of many companies on the exchange. The selling sentiment and declining market are different phase of the market that requires a change in strategies to navigate and follow the trend. It is expected that smart money will take advantage of correction and oversold state in the market to buy into value and defensive stocks to support rebound any moment from now.
The NGX index’s action has finally broken down the T-line to trade below it and the two moving averages of 50-EMA and 50-SMA that indicates weak market 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 progress, due to the continued mismatch of policies by these economic managers and previous ones. 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 below $80 per barrel at the international market.
Technically, the NGX is down in the face of selling sentiments and profit taking as revealed by the candlestick formation and momentum indicators. The ADX is looking down at 27.26, while RSI and Money Flow Index were down to read 39.19 and 63.45 points against the previous session 42.35 and 68.78 points respectively. Market players should watch this current trend and trade caution in the face of funds leaving the market on selloffs in some sectors. Also, trading volume pattern continued to oscillates, suggesting buying interest and selloffs in some sectors in the midst of players digesting the recent macroeconomic data.
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 continued oscillating, trading at $73.04 per barrel in the midst of weak manufacturing data from US and China, coupled with inventory draw down and OPEC delay in hiking output. Even with expected rate cut by Fed in September which will marginal. As rising geopolitical uncertainties across many economies is a threat to the global economy. 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 downside and it was sustained throughout the session, despite oscillating on profit taking in some blue-chip companies and buying interest in others, a situation that pushed the NGX’s index to an intra-day low of 96,092.31 basis points from its highs of 96,537.48bps, before closing below its opening level at 96,210.20bps.
Market technicals for the session were negative and mixed with lower volume when compared to the previous session in the midst of breadth favoring the bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 26% buy position and 74% sell volume. The total transaction volume index stood at 0.72 points, just as energy behind the day’s performance was relatively strong as Money Flow Index was down to read 63.45pts, from the previous day’s 68.78pts, indicating that funds left the market.
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Index and Market Caps
The NGX’s All-Share Index closed Thursday with a 327.28 basis points loss at 96,210.2bps, after opening at 96,537.48bps, representing a 0.34% decline. Market capitalization fell by N188bn, closing at N55.27tr from the previous day’s N55.45tr, representing a 0.34% value loss.
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Thursday’s downturn was driven by profit taking and selloffs in the shares of Flourmill, Oando, Stanbic IBTC, NB, Zenith Bank, Wapco, Nahco and RT Briscoe among others, impacting negatively on Year-To-Date gain which reduced to 28.67%. That of Market capitalization equally slowed to N10.34tr, representing 35.08% above its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Insurance and Energy indexes closed higher by 0.10% and 0.06% respectively, while NGX Banking index led decliners after losing 0.81%, followed by Consumer and Industrial goods with 0.39% and 0.01% respectively.
Market breadth was negative as losers outnumbered gainers in the ratio of 28:20, while activities in volume and value were mixed after investors exchanged 388.62 million shares worth N9.57bn. Volume was driven by trades in Zenith Bank, Oando, GTCO, FTN Cocoa and UBA.
Berger Paints and Meyer were the best performing stocks, gaining 10% each, closing at N17.05 and N5.83 per share respectively on the back of market forces and expectations respectively. On the flip side, RT Briscoe and FTN Cocoa lost 10% and 9.80% respectively, closing at N2.34 and N1.38 per share, purely on profit taking and selloffs.
Market Outlook
We expect mixed sentiment on bargain hunting on pullbacks and banks interim dividend paying stocks in expectation of their half year numbers as sector rotation continue in the market. Portfolio repositioning is however continuing, 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.
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- Importance of Numbers in Profitable Trading & Stock Picks
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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdata.com.ng
ambrose.o@investdataonline.com
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