Market activities currently show mixed sentiments, amidst the seeming accumulation as dividend announcements give way to repositioning by investors in expectation of Q1 earnings reports now is in full swing with late Friday’s filing of Forte Oil Pl’s performance score card for the first quarter engendering hope of a bountiful harvest at full year, all things being equal as Economists would say.
Even then, there is need for traders and investors to be very careful because, if the numbers do not meet market expectations, it would give credence to the popular saying: “sell in May and return in October.” But where the numbers goes the way of the market, especially against the backdrop of an improving macro-economic environment and the economic data, the latest of which was Thursday’s inflation data from the National Bureau of Statistics (NBS) showing that inflation dropped for the second consecutive month in March.
Added to this is the fact that consumer confidence index for Q1 was positive, rising to 62.7 point from 58.20 points in Q4 of 2016.
Market players should be cautious with bearish feelings remaining high as revealed by technical indicators, especially market facilitation index that relates price with volume movement.
Below is the explanation about the indicator and why the table shows the position of equities on the exchange.
The Market Facilitation Index (MFI) is the creation of Bill Williams an American trader. The indicator endeavors to establish the effectiveness of price movement by computing the price movement per unit. This is accomplished by subtracting the day’s low from the high and dividing the result by the total volume.
Simply put, the MFI as an indicator measures the strength or weakness behind movements of the price of an asset and can help an trader decide when a price trend is strong enough to justify trading it, when a new trend may be about to start and when to stay away from an asset altogether. It does this by looking at changes in the size of price moves and whether trading volume is rising or falling.
Analysis
As an indicator on its own, the MFI is of no significant value. Nonetheless, if the current price candles MFI and volume are compared to the previous candles MFI and volume, the index starts to have some significant tradable data.
The four possible groupings of MFI and volume were termed Green, Fade, Fake and Squat by Williams.
Volume Index Terms
+ + Green
– – Fade
– + Fake
+ – Squat
Green: The MFI increases and the volume increases. This means that the amount of participants entering the market increases, therefore the volume increases and the fresh incoming players align their positions in the direction of candlestick growth. Notice the long solid candles in the candlestick chart which indicates that the trend has begun and is picking up speed.
Fade: The MFI falls and volume falls. It means that the market participants are indifferent and the price movement is small on small volumes. This usually happens at the end of a trend.
Fake: The MFI increases, but the volume falls. It is highly likely that the market is being supported by broker speculation and not any significant client volume.
Squat: The MFI falls, but the volume increases. In this particular situation bulls and bears are fighting between themselves to see who will dominate the next trend. These battles are noticeable by the large sell and buy volumes. However, the price does not change appreciably since the strengths are equal. One of the competing parties either the buyers or the sellers will ultimately triumph in the battle. Usually, the fracture of such a candle indicates if this particular candle determines the continuation of the trend, or terminates the trend.
NSE stocks with MFI +Volume signals are in the table.
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