Selling Sentiments May Linger On NGX, Amid Profit Taking, Bargain Hunting, Ahead Of Banks’ Half-Year Earnings Inflow
Market Update for August 21
It was another bearish session on the Nigerian Exchange on Thursday, following sector rotation and portfolio rebalancing on the uptick rates in the fixed income market ahead of the earnings reports of interim dividend paying banks. These are expected to start hitting the market in the last full trading week of August, and ahead of the first few sessions of September, before positioning for Q3 earnings reporting season. Even then, the bearish transition or pullbacks continued to create new entry opportunities for discerning investors and smart traders. Also, the low traded volume in a decline phase of the market shows the exit of smart money which weighed on the composite NGX All-Share index which closed lower below 141,000 basis points mark on negative market breadth and selling sentiment.
Meanwhile, the current phase of decline and weakness on the NGX has extended after index’s action broke down the 20-day EMA, this calls for cautious trading in the face of smart money profit taking and digesting the recently released quarterly earnings reports of quoted companies. The weak momentum in the market is expected to continue until buyers start stepping into value and growth stocks. As Money flow read 45.77points which indicates selling pressure and ongoing profit taking.
The mixed sentiment continued at the global market as all eyes on fed chairman speech today at annual Jackson Hole conference and development in the search for peace deal in Ukraine, expecting oil prices to fall once a peace deal is reached. Knowing that possibility of more sanctions or tariffs on Russian oil buyers, if all these efforts to secure peace in Ukraine fails in the midst of geopolitical tension in Middle East conflicts and global economic recovery. Also, all eyes are on Trump planning to meet with Ukraine and Russia Presidents together for peace talk, even as major stock markets of the world have oscillated as a result Trump leadership pattern and policy statements here and there.
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 and pullbacks persisting.
Technically, money flow and other momentum tools were down, indicating that funds flying away from the market, despite the pullbacks and correction that presents opportunities to buy low and sell high in the midst ongoing volatility and decline phase of the market. The index inched lower on a selling sentiment, thereby creating the perfect setup for high probability of continuation to catch good entering position at the right price. Also, the index action trading below T-line and heading to two moving averages of 50-EMA and 50-SMA which reveals further weakness in the midst of changing market sentiment and technicals on the NGX.
Market pulse as revealed by the candlestick formation and momentum indicators shows that ADX is looking down to read 76.11points, while RSI and Money Flow Index were down at 57.94 and 45.77points against the previous session’s 63.75 and 49.85 points respectively. NGX at this point correction, players should be watchful and trade wisely in the midst of decline phase and selling sentiment across some major sectors and indexes on a daily time frame. Also, trading volume pattern continues to oscillate, suggesting institutional participation is slowing down 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 its economic managers.
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 on Thursday inched up to continued its oscillation, trading at $67.67 per barrel, in the midst of stalled Russia -Ukraine peace talks and strong US demand. Even as geopolitical uncertainties persists on a global supply outlook. Even as OPEC production hike misguide the market. The ongoing developments will trigger inflation and rate hikes if peace is achieved. 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.
Thursday’s trading started in the red and it was sustained throughout the session, despite the seeming positioning in some stocks, as profit taking hits many companies. This situation pushed the index to its intra-day low of 140,330.80bps from its highs of 142,058.80bps, before closing below its opening level at 140,332.40bps.
Market technicals were weak and negative with lower volume when compared to previous session in the midst of breadth that favors the bears on a selling pressure as revealed by Investdata’s Sentiments Report showing 0% buy position and 100% sell volume. The total transaction volume index stood at 0.47points, as impetus behind the day’s performance was relatively weak, as Money Flow Index was down to read 45.77pts, from the previous day’s 49.85pts, indicating that funds left the market.
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Index and Market Caps
At the end of Thursday trading, the benchmark index NGXASI shed 1,233.86bps, closing at 140,332.44bps from 141,566.30bps, representing a 0.87% decline, while market capitalization fell by N780bn to close at N88.78tr from the previous day’s N89.56tr, representing a 0.87% value loss.
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The session downturn was driven by profit taking and selloffs in the shares of MTNN, BUA Cement, Oando, NB, Guinness, Conoil, Ellah Lakes, UPDC, Champion and Veritas Kapital among others, which impacted negatively on Year-To-Date gain which inched lower to 36.34% while Market capitalization gain stood at N38.00tr, representing 41.46% increase over its opening level for the year.
Bearish Sector Indices
Sectoral performance indexes were in red, except for NGX Banking index that closed higher with 0.47%, while NGX Insurance index led the decliners after losing 4.69%, followed by Industrial goods, Energy and Consumer goods with 4.04%, 0.06% and 0.04% respectively.
Market breadth was negative as losers outnumbered gainers in the ratio of 45:15, while activities in volume and value were down, after investors exchanged 573.74m shares worth N12.87bn, with volume driven by trades in Fidelity Bank, Verita Kapital, Universal Insurance, Accesscorp and Aiico.
NSL Tech and Omatek were the best performing stocks, gaining 9.38% and 5.88%, closing at N1.05 and N1.44 per share respectively on the back of sentiment and market forces. On the flip side, IEI and Thomas Watt lost 10% each, closing at N3.24 and N3.33per share, purely on selloffs and profit booking.
Market Outlook
We expect selling sentiments to continue on profit taking in the midst of sector rotation and bargain hunting. As players digest economic and corporate numbers in the face of portfolio rebalancing and cautious trading, while investors buy into value in the midst of portfolio reshuffling, even as few quarterly reports are expected to hit the market.
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
