Reversal Ahead, As Brent Crude Hits $101.43pb, Amid Positioning Ahead Of More 2021 Audited Financials

Market Update for February 23

Trading on the Nigerian Exchange at the midweek was volatile and mixed, closing slightly lower on a negative sentiment due to profit taking, thereby halting three successive sessions of bull transition on a low traded volume in the midst positive market breadth and selling sentiment.

The seeming calmness and sideways movement of the NGX All Share index over the past two weeks indicated that the market is waiting for a trigger, after unaudited corporate earnings revealed impressive performance to sustain the market above the 47,000 mark. The market is awaiting other 2021 full-year audited financials with corporate actions in form dividend recommendation to stimulate demand for equities as market had treated companies with growth in payout fairly since their scorecards were made available, especially United Capital, MTNN and Vitafoam.    

Profit taking in banking, consumer and industrial stocks during the session led to pullbacks in prices, creating opportunities for new entrance especially income investors ahead of more earnings release . There are also the expected impacts of the rallying oil price now above the $100 per barrel mark at $101.43pb in the international market. These are likely to influence equity prices on the domestic front positively, while supporting economic and market fundamentals.  

We expect market volatility to continue in the midst of earnings reporting season, providing opportunities for the buy and sell sides, but it is more important than ever to get good clear concise information to help firm up your trading and investing plans as the market awaits the big names to release their corporate earnings and actions as a push for another positive reversal.

With all this in mind, I want to personally invite you to join me live today at Investdata Trading Academy with Ambrose every trading day at noon to get the real live position of the market and direction of individual stocks on exchange. This is necessary to help you make investment decisions at any point. Here, we advise you either as investors and traders to allow their stop-loss and profit targets guide you, while removing every atom of emotion.

Technically, the NGX’s index action, slowed down on profit taking in blue chips stocks to signal a change in momentum and trend as the index and indicators are becoming mixed, looking the same direction in the midst of selling sentiments on a low traded volume. Investors need to watch this, as funds are leaving the market. Trade metrics for the session revealed the “wait and see” attitude of players, ahead of more fundamental news, especially dividend announcements among others in the market any moment from now.  Also, at the midweek’s session, Niger Insurance, May & Baker, Fidson, Ucap, Academy Press, RT Briscoe and Wema Bank, among others hit new 52-week highs.

Candlestick formation at the end of midweek’s trading signaled that sellers are at work, but it needs confirmation by market forces as the market open for Thursday’s session to give direction as the NGX index now trades on top of the shortest moving averages and above the 20, 50 and 200. Momentum indicators are looking down, as the ADX reads 62.32, the RSI closed above 50 at 70.37 and Money Flow Index dropped to 60.23 points on the daily time frame. The continuation of this trend depends largely on the interplay of market forces and flow of funds, especially as the direction of fixed income market yields remains unclear with rates not rising as expected.

Meanwhile, Wednesday’s trading started slightly on the upside, and was sustained till midday before pulling back on profit taking and selloffs, a situation that pushed the NGX index to an intraday low of 47,207.27 basis points, from its highs of 47,265.69bps, and finished the day below its opening point at 47,207.27 bps.

Market technicals were weak and mixed, as volume traded was lower than in the previous day amidst of breadth favoring bulls on a negative sentiment as revealed by Investdata’s Sentiment Report showing 100% sell position. The total transaction volume index stood at 0.74 points, just as momentum behind the day’s performance remained relatively strong. Money Flow Index closed at 60.23 points, after suffering a dip from the previous day’s 66.62 points, indicating funds left the market.

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Index and Mkt Cap Movement 

At the close of midweek’s trading, the benchmark NGX All-Share index fell by 39.63 basis points at 47,207.27bps, after opening at 47,245.90bps, representing a 0.08% drop, just as market capitalization fell by N22bn, closing at N25.44tr, from the opening value of N25.46tr, also representing a 0.09% depreciation in value.

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Midweek’s downturn was driven by selloffs and profit taking in stocks like GTCO, Lafarge Africa, Dangote Sugar, Stanbic IBTC, UBA, Flour Mills, Ecobank Transnational Incorporated, NASCON Allied, and Africa Prudential, among others. This impacted mildly on Year-To-Date gain, reducing it to 10.51%. Market capitalization growth slipped to N2.78tr YTD, representing a 14.53% rise over the opening level for the year.

Mixed Sector Indices 

Performance indexes across the sectors were mixed, as the NGX Insurance and Energy closed 0.91% and 0.03% higher respectively, while the NGX Consumer goods led the decliners after losing 0.58%, followed by Banking and Industrial goods with 0.35% and 0.02% respectively.

Market breadth was, however, positive as gainers outnumbered losers in the ratio of 26:16, while activities in volume and value terms were down, after investors exchanged 230.65m shares worth N3.58bn, compared to the previous day’s 421.83m units valued at N5.16bn. Volume was boosted by trades in Transcorp, Fidelity Bank, United Capital, Regency Insurance and FBN Holdings.

e-Tranzact and RT Briscoe were the best performing stocks for the day, gaining 10% and 9.72% respectively, closing at N2.20 and N0.79 per share on market sentiment and forces. On the flip side, Africa Prudential   and Dangote Sugar lost 5.77% and 5.28% respectively, closing at N7.35 and N17.05 per share, on profit taking.

Market Outlook

We expect a reversal on the back of Brent Crude crossing the $100pb market, as investors continue accumulating ahead of the release of more 2021 audited financials with corporate actions to boost positive vibes during this season. Also, the market continues to interpret the positive economic data released recently, in the midst of profit-taking and portfolio rebalancing. This is will result in market players targeting fundamentally sound and dividend paying stocks in hope of dividend announcements, just as inflation rate moderates at 15.60% and Q4GDP up at 3.98%, while the International Monetary Fund is calling for hike in interest rate and further devaluation of Naira.

Meanwhile, market players continue to digest the quarterly and unaudited 2021 full-year results available in the market and what is happenings in fixed income market after the NGX index pulled back slightly to trade above its 50-Day Moving Average on a low sell volume in the face of assets rebalancing and the changing patterns in February as the investors look forward to more audited 2021 earnings reports.

The relatively high volume traded in the midst of volatility and recovery moves are creating new buy opportunities on the strength of corporate numbers and economic data. Also, candlestick formation and volume traded during the session shows that institutional players are not buying yet. It is equally noteworthy that during a ranging market many players sit on the fence waiting for a breakout, or down before jumping into any position. Even so, many stocks are trading within their buy ranges, a situation expected to attract more funds into the stock market, given the Dividend Yield capable of serving as a hedge against inflation.

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Ambrose Omordion

CRO|Investdata Consulting Ltd

Tel: 08028164085, 08179547605

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