Sentiments Stay Mixed, Amid Pullbacks On Low Valuation, Quarter-end Window Dressing

Market Update for June 24

Pullbacks and profit taking on the Nigerian Exchange continued on Monday, with activities at the started of the last trading week of June and first half of 2024 closed negative, ahead of the quarter-end window dressing by fund managers and market operators that signals the possibility of a reversal. Already, the benchmark NGX All Share index has already slipped into red so far in this month of June on a mixed sentiment and very high traded volume in the face of negative market internals. The benchmark NGX All-Share index closed lower on a somewhat weak and bottom reversal chart pattern that requires confirmation as trading opens Tuesday in the midst consolidating and a distribution phase.

The market pulled back again in the face of profit taking and buying interest in some key sectors of the market to reflect the ongoing portfolio repositioning ahead of second half of 2024 in the midst of expected earnings reporting season and interim dividend from banking sector and few other companies.  The 100,000 psychological line remains a new strong resistance level for the market, just as momentum indicators are looking southward as an indication of weakness in trend and change in market structure.

As witnessed last week, the banking sector started topping the volume and value chart, with FBN Holdings trading over 600 million shares ahead of its primary market activities to meet the Central Bank of Nigeria’s new capital base of N500bn for international banks.

Mr. Olufemi Otedola, chairman of FBNH has so far increased his stake in the holding company to 11.4%, making him the largest single shareholder,  ahead of plans to unfold its recapitalisation road map to the market. The high volume of trade in the banking sector indicates positioning and confidence in the sector ahead of half year earnings reports.

The NGX index’s action is trading flat on the T-line after breaking down the line and retraced up, while it remains above the 50-EMA and 50-SMA in the midst of the two moving averages crossing each other. 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.

With the half year earnings season in view, GTCO has informed the market of its closed period and board meeting to approve the half-year 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 Eterna, Custodian Investment and Neimeth Pharm, among others, while Airtel Africa updated the market of its ongoing share buyback. The Initiates Plc and FBNH 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 flat at 19.78, while RSI and Money Flow Index are down to read 55.83 and 60.32 points against the previous session 57.34 and 68.79points respectively. Market players should watch this current trend and trade wisely as pullbacks continue in the face of consolidating market and 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.

Meanwhile, Monday’s trading opened in the green before pulling back to oscillate for the rest of the session on profit taking and  buying interests in insurances stocks, a situation that pushed the NGX’s index to an intra-day low of 99,304.12bps from its highs of 99,834.00bps, before closing below its opening level at 99,304.12bps.

Market technicals for the session were negative and mixed with higher volume when compared to the previous session in the midst of breadth favoring the bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 40% buy position and 60% sell volume. The total transaction volume index stood at 1.91 points, just as impetus behind the day’s performance was relatively strong as Money Flow Index was down to read 60.32pts, from the previous day’s 68.78pts, indicating that funds left the market.

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Index and Market Caps

At the end of Monday’s trading, the composite NGX All-Share Index shed 438.93 basis points to close at 99,304.12bps after opening at 99,743.05bps, representing a 0.44% decline. Market capitalization fell by N248.30bn, closing at N56.18tr from the previous day’s N56.42tr, which also represented a 0.44% value loss. As Airtel was markdown for final dividend of N53.

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.

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Monday downturn was driven by selloffs and profit taking in the shares of Airtel Africa, FBNH, GTCO,  Dangote Sugar, Oando, BetaGlass, International Breweries, Wapco, Chams and Veritas Kapital among others. This impacted negatively on Year-To-Date gain which reduce to 32.8%. Market capitalization YTD gain stood at N11.28tr, representing 37.50% above its opening level for the year.

Bearish Sector Indices

Sectoral performance indexes were in red, save for NGX Insurance index that closed in green with 1.05%, while NGX Banking index led the decliners after losing 1.04%, followed by Consumer and Industrial goods with 0.44% and 0.17% respectively. Just as NGX Energy finished flat.

Market breadth was negative as losers outnumbered gainers in the ratio of 25:20, while activities in volume and value were up after players exchanged 961.44 million shares worth N19.17bn. Volume was driven by trades in FBNH,  BetaGlass, Veritas Kapital, Chams and Aiico.

NSLTech and VFD Group were the best performing stocks, gaining 10% and 9.9%, closing at N0.55 and N44.60 per share respectively on market forces and sentiment. On the flip side, International Breweries and Deap Capital   lost 10% and 8.9% respectively, closing at N3.96 and N0.51 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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