Sustained NGXASI Pullbacks Amid Q1 Earnings Inflow, Makes Nigerian Stocks More Attractive

Market Update for May 13

Trading activities on the Nigerian Exchange opened for the week on a negative note, thereby extending the bearish mood and sentiment after the market ranged for three trading sessions, pulling back to its strong support level of 97,709.38 basis points. That signals a continuation of trend, or reversal which is a pure function of market forces and sentiment as trading opens on Tuesday, just as more corporate earnings flow in, especially from insurance companies and others, on the back of expected macroeconomic data. There is also the outcome of fixed income primary market auctions ahead of inflation data, the next policy meeting and Q1 GDP reports.

Monday’s pullback indicates weakness, as the market internals were negative on above average traded volume in the midst of changing fundamentals and mixed numbers released so far. The composite NGX All-Share index closed lower to form a new downtrend and demand zone as selloffs and profit taking in highly priced stocks and blue chip companies weighed on the market.

However, the correction and pullbacks are creating buy opportunities for discerning investors and bargain hunters as the dividend rain continues with qualification and payment dates to guide positioning. Market players have continued to digest and reposition their portfolios on the strength of Q1 numbers and changing market dynamics. Dividend incomes are yet to provide some level of liquidity to support the market, despite the ongoing dividend payments and AGM meeting held so far.

The seeming weakness in the midst of selling sentiment across the major sectors of the market dragged the index southward, as investors and traders are expected take advantage of the low prices and valuation to buy into value. Given the oversold state of the market and mixed technical position as revealed by the double bottom chart pattern at the end of Monday trading which signals reversal of trend or continuation that needs to be confirmed. Already, the Q1 scorecards, expected corporate and economic numbers are likely to be the game changer, depending on the state of these numbers and unfolding happenings in the economy to further give insight and guide player’s decisions.

The NGX index’s action still trades below the T-line and 50-Day Moving Average, confirming the weight of selling sentiment in the market and weak momentum, as the index inched up on a high traded volume and a slight positive market breadth close to 8-day moving average exponential and 50 DMA to confirm continuation or reversal of trend depending on market forces and liquidity level.

Market players are also looking at corporate actions to position for dividend income. 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.

AGMs and board meetings notification continued on the NGX with the latest being UACN, Unilever, May & Baker, among others. As UBA, Transcorp Power and United Capital informed the market of their insiders dealing. Therefore, investors should 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 weak, as it continues to look southward on selling sentiment as revealed by candlesticks formation and momentum indicators. As ADX is looking down at 31.10, while RSI and Money Flow Index are down to read 33.16 and 43.57 points against the previous session 36.18 and 49.81 points respectively.  Market players should watch this current trend and trade with caution after the index had pulled back again in the face of funds leaving the market slowly. Also, trading volume pattern remained mixed, to suggests wait and see in some sectors and selloffs in the midst of a decline phase.

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 pulled back again, as it continues its oscillation to trade at $83.27 per barrel in the midst of weak demand and statements from US Fed on cooling expectation of rate cut, which may slowdown growth and oil consumption. As Middle East conflict continued in the face of mixed global macroeconomic data and unclear policy direction of major central banks. Geopolitical tension across the globe remained a major threat to many economies and the commodity market and other factors that impact oil price as it continued to rally. This trend may likely continue in 2024, this up and down movement that drive volatility. As middle East conflict and war in Ukraine last.

Meanwhile, Monday’s trading started slightly in the upside before pulling back for the rest of the session, despite oscillating on profit taking and buying interest in some stocks, a situation that pushed the NGX’s index to an intra-day low of 97,689.04bps from its highs of 98,261.51bps, before closing below its opening figure at 97,709.38bps.

Market technicals for the session were negative and mixed, as volume was higher when compared to the previous session in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 4% buy position and 96% sell volume. The total transaction volume index stood at 0.94 points, just as impetus behind the day’s performance was  relatively weak as Money Flow Index slowdown to read  43.57pts, from the previous day’s 49.81pts, indicating that funds left the market.

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Index and Market Caps

At the end Monday’s  trading, the benchmark NGXASI shed 524.38bps, closing at 97,709.38bps after opening at 98,233.76bps, representing a 0.53% decline, just as market capitalization fell by N296.82bn, closing at N55.27tr from the previous day’s N55.56tr, which also represented a 0.53%  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.

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The downturn was driven by selloffs and profit taking in the shares of Seplat, PZ, NB, UBA, Accesscorp, Nascon and Wapic among others. This impacted negatively on Year-To-Date gain which reduce to 30.67%. Market capitalization YTD gain stood at N11.23tr, representing 36.21% above its opening level for the year.

Bearish Sector Indices

The sectoral performance indexes were in red, save for NGX Industrial Goods that closed flat, while the NGX Oil/Gas index led the decliners after losing 5.90%, followed by Banking, Insurance and Consumer goods with 0.75%, 0.64% and 0.33% respectively.

Market breadth turned negative as losers outnumbered gainers in the ratio of 24:15, while transactions in volume and value were up after investors exchanged 439.10m shares worth N11.38bn. Volume was driven by trades in Notore, Accesscorp, Universal Insurance, UBA and Regency Insurance.

Tantalizer and SterlingNG were the best performing stocks, gaining 8.70% and 5.38% respectively, closing at N0.50 and N4.70 per share respectively on market forces and injection of capital. On the flip side, Seplat and PZ  lost 10% and 9.91% respectively, closing at N2962.30 and N25.00per share, purely on selloffs and profit taking.

Market Outlook

We expect mixed sentiments to continue in the face of low price attraction, dividend investing and reactions to Q1 numbers as Insurance corporate earnings are expected with dividend announcements and CPI report, while taking advantage of pullbacks to position and rebalancing portfolio.

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.

Ambrose Omordion

CRO|Investdata Consulting Ltd