Pullback May Continue Amid Portfolios Rejigging, Dividend Investing As Pullback Lure Investors

Market Update for June 25

The bearish pattern on the Nigerian Exchange continued Tuesday, as the composite NGX All Share index moved southward for a third successive session on a low traded volume and negative market internals ahead of quarter end window dressing by fund managers and market operators. The month of June is a weak one to watch historically as it ushers in first half year earnings reporting season. The low volume or lack of supply to the market indicates a likely move of smart money to markup prices, a situation that needs confirmation as trading opens at the midweek.

The price correction and profit taking on the exchange are creating buy opportunities for discerning investors and smart traders in the midst of ongoing portfolio rebalancing ahead of second half of 2024. This will, as expected, be dominated by primary market activities of banks and other companies raising funds to recapitalized their operations and businesses. For now, all eyes are on the forthcoming earnings reporting season and interim dividends from the banking sector and few other companies.

The NGX index’s action has broken down T-line to trade flat on 50-EMA and 50-SMA in the midst of the two moving averages crossing each other to signal weakness and changing market momentum and direction. Also, market players are looking forward to economic data and corporate earnings to reveal the state of economy and companies. Although, we see fiscal and monetary policies trying to return the nation’s economy to the path of recovery, despite the continued mismatch of policies and implementation style as oscillating oil production output persist in the midst exchange market challenges.

Ahead of half-year earnings season, more companies like Nascon have informed the market of their closed period and board meeting to approve the second quarter earnings report, in the face of  more Annual General Meetings notifications hitting the exchange, just as other companies presented resolutions from their meetings. The latest came from Jaiz Bank, CAP and Eterna, among others, while Airtel Africa updated the market of its ongoing share buyback. The Initiates Plc, SterlingNG, Ucap and Zenith Bank informed the market of insiders dealing in its shares.  In the midst of all these, it is safe for investors to target companies with consistent track records of dividend payment, strong fundamentals and growth prospects that will support further growth in earnings which price feeds on in any market cycle.

Technically, the market is on a pullback zone as revealed by candlestick formation and momentum indicators. As ADX is looking down at 18.69, while RSI and Money Flow Index are down to read 48.83 and 55.99 points against the previous session 55.83 and 60.32points respectively. Market players should watch this current trend and trade wisely as pullbacks continue in the face of  funds exiting the market on profit taking and selloffs. Also, trading volume pattern continued to oscillates, suggesting selloffs and buying interest in some sectors in the midst of wait and see attitude ahead of end of the quarter window dressing.

To navigate the rest of the 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 closed higher on Monday, as it continues its oscillation to trade at $86.01 per barrel in the midst of stronger dollar and mixed outlook for global demand. As US positive economic data and rate cuts by Fed continue to go front and back. Just as increasing geopolitical tension threats many economies even with the expect impact of rate cuts on the economic activities in the face of sticky inflation. This trend may likely continue in 2024, this up and down movement that drive volatility. As Middle East conflict and war in Ukraine continue to influence oil supply and demand.

Tuesday’s trading started on the downside and was sustained throughout the session, oscillating on profit taking and buying interests in insurances stocks, a situation that pushed the NGX’s index to an intra-day low of 99,169.02bps from its highs of 99,304.12bps, before closing below its opening level at 99,217.60bps.

Market technicals for the session were positive and mixed with lower volume when compared to the previous session in the midst of breadth favoring the bulls on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 36% buy position and 64% 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 55.99pts, from the previous day’s 60.32pts, indicating that funds left the market.

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Index and Market Caps

The benchmark NGX All-Share Index at the end Tuesday trading lost 86.52 basis points to close at 99,217.60bps after opening at 99,304.12bps, representing a 0.09% drop. Market capitalization fell by N50bn, closing at N56.13tr from the previous day’s N56.18tr, which also represented a 0.09% value loss.

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 pullbacks call for caution 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.

Meanwhile, the downturn was driven by selloffs and profit taking in the shares of Zenith Bnak, UBA, Dangote Sugar, Oando, BetaGlass, International Breweries, Wapco, Chams and Veritas Kapital among others. This impacted mildly on Year-To-Date gain which reduce to 32.7%. Market capitalization YTD gain stood at N11.27tr, representing 37.17% above its opening level for the year.

Bearish Sector Indices

Sectoral performance indexes were in the red, save for NGX Insurance index that closed in green with 0.81%, while NGX Consumer goods index led the decliners after losing 0.47%, followed by Banking and Industrial goods with 0.41% and 0.17% respectively. Just as NGX Energy finished flat.

Market breadth turned positive as gainers outnumbered losers in the ratio of 25:20, while activities in volume and value were down after players exchanged 361.57 million shares worth N6.16bn. Volume was driven by trades in Transcorp, GTCO Veritas Kapital, FBNH and Accesscorp.

Okomu Oil and John Holt were the best performing stocks, gaining 10% and 9.9%, closing at N291.58 and N3.14 per share respectively on market forces and sentiment. On the flip side, Oando and University Press lost 9.70% and 9.10% respectively, closing at N12.56 and N2.56 per share, purely on profit taking and poor earnings reports.   

Market Outlook

We expect mixed sentiments and pullback to continue in the face of low valuation and portfolios repositioning, dividend investing and end of the quarter window dressing, while taking advantage of pullbacks to buy into value.

This is amid the volatility and pullbacks that add more strength to upside potential. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.


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