Market Update for October 30

The Nigerian Exchange recorded a highly volatile session at the midweek as it continued its bearish momentum amid the rekindled buying interests at the peak of earnings reporting season. Already, many companies had reported better than expected Q3 numbers that reveal value with upside potentials as market players continue reacting to these earnings and rebalancing their portfolios.

The influx of corporate earnings reports during the trading session and after indicates that many of these companies are rushing to beat the statutory deadline and avoid penalty of any sort. The earnings generally beat market expectations, especially the medium and low priced stocks, including blue-chips while earnings reports of highly priced stocks were flat and mixed, a situation that sent signals to market players. This is especially true of income investors, ahead of the financial year end where such earnings support payout and price in the short and long run.

That notwithstanding, selloffs that hit the highly priced stocks and some blue chip companies, which weighed on the composite NGX All-Share index to close marginally lower on a very high traded volume and positive market internals to resist further decline to trade above 98,000 mark after breaking it down and retraced up. Thereby forming a bullish hammer reversal chart pattern that signal uptrend after the markdown phase ahead of the last trading session of the month.

As the year gradually winds down, sector rotation and portfolio rebalancing will persist, especially as numbers from the services sector and few others remained outstanding. Market reaction to the impressive earnings supported NGX to slow down especially with position taking in banking stocks and others like Nahco, Vitafoam, Skyway Aviation and Julius Berger. Also, Aradel Holdings announced interim dividend of N8w. The quarterly earnings should give insight to what investors should expect at the end of the current financial year.

Corporate Nigeria’s performance disconnected from the gloomy economic situation, reflecting the impact of hyperinflation in the country as prices for goods and services gallop daily, due to the ongoing economic reforms of the government. Also, there is ongoing capacity building to capture more market share among these companies, a situation that supported their numbers and reflected in their top and bottom lines in the previous quarters. Similarly, we cannot underestimate the capacity of earnings news and other factors that drive strength or weakness of any market that are the different dynamics of stock markets technically which require effective strategies to navigate and follow trends profitably.

At the current markdown phase on the NGX, discerning investors and smart traders are repositioning their portfolios along sectors and companies with potentials to release positive numbers on the strength of their earnings power at the end of Q4. Also, seasonal trends are likely to repeat themselves in these last months and weeks of the year which comes with seasonality and sentiment that makes it very important to market players across the globe. This is especially as retracement from strong support level of 97,765.03 basis points and 97,644.48bps after forming a bottoming tail and uptrend candles. This created the perfect setup for high probability swing trade to catch on ahead of financial news that will impact prices.

The NGX index’s action trades below the T-line and above the two moving averages of 50-EMA and 50-SMA, this indicate weak sentiment and somewhat 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 recovery. 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 $75 per barrel at the international market.

Technically, the NGX is on downtrend in the midst of buying sentiment, impressive earnings and improving transacted volume that signaled position taking around strong support levels of 97,736.82bps and 98,000.86, as the market is expecting more corporate numbers to give a clear direction. Just as candlestick formation and momentum indicators had revealed somewhat weakness in the market. As ADX continued to look down at 14.66, while RSI and Money Flow Index were down to read 48.00 and 58.68 points against the previous session 48.36 and 61.79 points respectively. Market players should watch this current trend and trade wisely in the face of funds leaving the market on buying sentiment in some sectors and selloffs in others. Also, trading volume pattern continued to oscillates, suggesting position taking and selloffs in the market amid players digesting earnings reports released so far and policy direction of economic managers.

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 at midweek inched up to continue its oscillation, trading at $73.03 per barrel in the midst of increased  US inventory  and lingering  conflict in the Middle East with exchange of heavy fire between Israel and Hezbollah worrying the  markets about supply. Also, demand outlook in the midst of rate cuts by the major central banks of the world. The rising geopolitical uncertainties across many economies remains a threat to the global economy and energy consumption. 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, trading for the session started flat before pulling down to oscillate for the rest of the session on selloffs in highly priced stocks and buying interest in blue chip companies. This situation pulled the NGX’s index to an intra-day low of 97,736.82bps from its highs of 98,087.12bps, before closing slightly below its opening level at 98,023.23bps.

Market technicals were positive and mixed with higher volume when compared to the previous session in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 82% buy position and 18% sell volume. The total transaction volume index stood at 1.26 points, just as impetus behind the day’s performance was  strong as Money Flow Index inched up to read 58.68pts, from the previous day’s 61.79pts, indicating that funds left the market, despite closing in red.

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Index and Market Caps

The NGX All-Share Index fell by 34.84 basis points, closing at 98,023.23bps, after opening at 98,058.07bps, representing a 0.04% drop. Market capitalization fell by N21bn, closing at N59.40tr from the previous day’s N59.42tr, representing a 0.04% value loss.

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The downturn was driven by profit taking and selloffs in MTNN, PZ, NGXGroup, Champion, Wapic and Cornerstone, among others. This impacted mildly on Year-To-Date gain as it fell to 31.09%, while Market capitalization gain stood at N15.10tr, representing 45.81% growth over its opening level for the year.

Mixed Sector Indices

Sectoral performance indexes were mixed, as NGX Insurance and Consumer goods index closed lower by 0.71% and 0.11% respectively, while the NGX Banking led advancers after gaining 1.73%, followed by Industrial and Energy with 0.24% and 0.22% respectively.

Market breadth turned positive, as gainers outnumbered losers in the ratio of 32:22, while activities in volume and value were up after investors exchanged 538.96 million shares worth N15.30 bn. Volume was driven by trades in Jaiz Bank, UBA, Chams, MTNN and Zenith Bank.

Skyway Aviation and Vitafoam were the best performing stocks, gaining 10% each, closing at N27.50 and N22.00 per share respectively on the back of impressive earnings and market forces respectively. On the flip side, Jaiz Bank and PZ lost 10% each, closing at N2.25 and N18.90per share, purely on profit taking.

Market Outlook

We expect mixed sentiment to continue on reaction earnings reports,  profit taking and positioning, ahead of more Q3 earnings reports. Also, sector rotation and portfolio rebalancing continues in the market, 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.

Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

08028164085