Profit Taking Spikes Panic Selling, Even As Market Fundamentals Remain Unchanged

Market Update for December 14

It was a difficult trading session on the Nigeria Stock Exchange on Thursday, as market indicators declined further on a highly volatile mode to consolidate the losing streak that almost wiped out all of the gains recorded month-to-date, due to massive profit taking in blue chip stocks that almost triggered panic among retail investors. Considering what the market had done in terms of performance year-to-date especially, profit taking is not unexpected also given that it is an integral aspect of stock trading and investing.
Trading activities for the day started out with a little pop to the downside, reaching intraday lows of 37.840.14, breaking down the psychological line of 38,000 and strong support level of 38,241.45 from the day’s high of 38,539.91 on below recently traded market average volume. The index had actually formed bear wedge, despite reducing the losing streak to close the day at 37,933.70 which was also lower than the day’s opening figure.
As the corrective wave 4 extended to breakdown the former resistance level that had turned strong support, expect a reversal at 37,374.88 if the index does not hold at 37,709.20 to usher in wave 5 extension that will be supported with the positive earnings reporting season sentiments in the New Year.
Yes, institutional money flow index is looking down to show that money is leaving the market which is as a result of profit taking, investors should not activate their panic mode just yet, since there is no negative news in the market. The banks for some time now have been carrying these high level of Non-Performing Loans (NPL) and prices had rallied, dividend had always been paid, supported the sector’s above 70% return year-to-date, even as some of these banking stocks are still undervalued.
Technically, the market’s traded volume was low, while at the same time selling pressure adjusted down from the previous day’s 95% to 87%, with volume index of 0.60 and buying volume of 13% of the total transaction to continue the bear run. Many indicators are signaling a sell market as revealed by market breadth for the day. The possibility of reversal at this point is high as traders and investors take advantage of the pullback to position for dividend in 2018
Meanwhile, the All Share Index shed all of 600.94 basis points to close at 37,933.70, from the opening 38,534.64 points, representing a 1.56% decline, while market capitalisation was up by N76.92bn as a result of the 5.3bn additional shares added to those outstanding for International Brewery due to its recently concluded merger scheme involving International Brewery, Intafact Beverages and Pabod Breweries Ltd. This raised market capitalization to N13.5tr, from previous day’s N13.42tr, representing a 0.57% increase. The continued downturn was attributed to losses suffered by all classes of stocks like Dangote Sugar, Dangote Flour, Lafarge Africa, Dangote Cement, NB, ETI, UBA, Access Bank, UBN, Zenith Bank, FBNH, Presco and Guinness Nigeria .
This in turn impacted negatively on the year-to-date return of the All-Share index, reducing it to 41.15%, just as YTD growth in market capitalisation stood at N4.25 trillion, representing a growth of 45.97% above the year’s opening value.
Market breadth was negative as the number of decliners widened, outpacing advancers in the ratio of 32:10 on a low traded volume that was lower than the mid-week level.
Activities in terms of volume and value were mixed as volume dropped by 10.698% to 289.3m units from previous day’s 323.95m shares, while value was up 41.43% from N4.4bn in the previous day to N6.22bn. Transactions was dominated by banking stocks again as FBNH, FCMB, Zenith Bank, Fidelity Bank and Diamond Bank topped the volume chart.
At the end of the day’s trading Seplat and Caverton topped the advancer’s log, gaining 7.73% and 3.97% respectively to close at N540.05 and N1.37 on positive market sentiments. On the other hand, Flourmills and UBN shed 9.71% and 5.00% to close at N30.47 and N7.60 respectively on market forces and profit taking,


The ongoing volatility will continue being the last trading day of the week that will usher in the last full trading of the year as traders take profit and seek information to reposition, especially as inflation figure for November is expected before the week runs out and full year earnings season approaches. The positive outlook for emerging market in 2018 as a result of high commodity prices is a major attraction as currencies of these developing markets remain relatively stable. It begins to make much more sense for investors when you add the undervalued nature of assets on these exchanges. November inflation figure is expected to hit the market today.
Again, we advise that investors allow numbers to guide their decisions while repositioning for the rest of the year’s trading activities, especially now that stock prices remain volatile amidst improving company, economic and market fundamentals.
It is time to combine fundamentals and technical tools to take decision by knowing the support and resistant level to reposition or exit any position. Market is in phases know the cycles in order to manage your trading and investing risk. For stocks that should be on your shopping list to buy in this seasonality changes as the year winds down, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.
Get your home study pack on INVEST 2018 Traders & Investors Summit and ride with the current recovery on Nigeria’s stock market and economy. By investing and trading knowledgeable. You can also still access stocks analysed in the home study pack of the INVEST 2018 traders & investors summit, which will be available this Friday.
Comprehensive training materials on stock Trading and Investing for Financial Independence series are Available, you can play and watch on your mobile phone, laptop, desktop and Tv. Kindly call or send yes to 08032055467, 08028164086 or 08111811223.

Ambrose Omordion
CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467

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